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Assignment to prepare for Class #15

1. The Mears household earned $100,000 in after-tax income in 2004. Given that the interest rate is 5%, the Mears household consumed $80,000 in goods and services.
1. What would economists call the money the Mears household earned but did not use to buy goods and services to consume?
2. For what reasons might the Mears household not spend all the money they have available to spend?
3. The Alpha corporation wants to build a new store. It needs $20,000 to build cash registers for the store. What is the process called whereby a company creates a thing that it later uses to create future goods or services?
4. What is the name for the things a company creates that are later used to create goods or services in the future?
5. What are three ways that the $20,000 that the Mears household did not spend could be channeled to the Alpha corporation so that the Alpha corporation could build the cash registers?
6. If the store expects the cash registers to generate $1,200 per year in revenue and never to depreciate, would they want to borrow the money to buy cash registers from the Mears household at the going interest rate? Why or why not?