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Purchasing new homes would count as an investment. According to Blanchard et al. Macroeconomics: a European Perspective pp 568 in glossary investment is defined: Investment (I): Purchases of new houses and apartments by people, and purchases of new capital good (machines and plants) by firms. The source above is the leading undergraduate macroeconomics ...

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That imagined world, in which individuals only wanted to invest their money in stocks and not on any other product that has anything less than X% annually is inconsistent with how people think about investments (and how financial markets work). The reason is that returns are not static, but respond to demand. If everyone wants to just buy stocks with ...

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Is it because risk seeking investors also get some utility from expected return? Yes. It is a common assumption that investors invest to get returns, so in this good space returns are indeed a "good", not a "bad".

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$π = φ^{(σ−1)}*\frac{f_E+f_D}{φ^{(σ−1)}*(1+τ^{(1-σ)})}+φ^{(σ−1)}\frac{f_E+f_D}{φ^{(σ−1)}*(1+τ^{(1-σ)})}-f_E-2f_D$ $π = 2\frac{f_E+f_D}{(1+τ^{(1-σ)})}-f_E-2f_D$ $(1+τ^{(1-σ)})π = 2(f_E+f_D)-(1+τ^{(1-σ)})f_E-2(1+τ^{(1-σ)})f_D$ $(1+τ^{(1-σ)})π = 2f_E+2f_D-f_E-τ^{(1-σ)}f_E-2f_D-2τ^{(1-σ)}f_D$ $(1+τ^{(1-σ)})π = f_E-τ^{(1-σ)}f_E-2τ^{(1-σ)}f_D$ $(1+τ^{(1-σ)})π = ... 3 Foreign Institutional Investors (FII) and Foreign Portfolio Investors (FPI) can and do invest in government securities as well. There may be restrictions of course leading to imperfect capital mobility. For example in India, FIIs/FPIs cannot hold more than 6% of outstanding stocks of securities. As interest rate increases (usually because of an external ... 3 Yes, Fed sends all its profit including the ones it earns on government debt back to the treasury (this was already answered on this site here). Fed can create an unlimited amount of money by buying treasuries but not because of the interest payments but because of the debt itself. The interest payments themselves do not generate new money in this ... 3 By the way, after a house is built (whether it was built this year or many years ago) it does provide economic value. If renters live there, then the rent they pay is counted as a service in GDP. And if the home owners live there then the same thing happens, the government estimates the 'imputed rent' and that is counted in GDP. 2 Just to add some more besides the answers above: Short answer: by influencing interest rate. Explanation: In the post Keynesian literature what has come to be appreciated a lot is that government purchases, backed by increased government debt, increases interest rate. Why? Well, that's in itself an interesting explanation and perhaps should be a separate ... 2 The term FDI is generally reserved for foreign capital investment in domestic assets of the host country for business interests as opposed to hot flows which are generally aimed for quick capital gains. Examples of FDI would include take-overs of firms, collaboration/merger with a domestic company, entry into a new market, etc. Such investment give returns ... 2 This is two questions. How do negative interest rates impact the future prospect and business model of (defined benefit) pension funds? Defined benefit pension funds have a discount rate and assumed returns to determine the required contributions. The exact mechanism for determining these depends upon the jurisdiction, but they are normally related to ... 2 Interest payments are contractual payments. They need to be specified with an exact formula. For a given set of cash flows, one could come up with a multitude of formulae that end up giving the same values. In order to make interest rates comparable, laws, regulations, and market conventions specify that different conventions be used. Of these conventions, ... 2 First there are some inaccuracies in your question. The central bank often goes to buy financial instruments that are riskier than government bonds (such as corporate bonds)- which is called "quantitative easing". This is simply not true large part of QE program consists of buying government bonds (treasury securities). Private bonds or other ... 2 Depends on the structure. In the US, most residential MBS are pass-through, so the MBS is prepaid. In Canada, MBS are (or at least were) mostly packaged into non-passthrough structures, so MBS cash flows follow fixed coupon schedule. There are prepayment penalties which are used to absorb the cash flows. My understanding is that European pfandebriefe ... 2 There’s already a longer answer, but two points of clarification. The Treasury would not “make money,” it just gets the interest back. The Fed purchases create settlement balances (“reserves”) for banks. (The Fed is a bank itself, those balances are the equivalent of private banks leaving deposits.) The Fed pays interest on those balances. When they need to ... 2 You can think about it from different viewpoints. All answers are true. I'll just try to explain it from another angle. We are on the same page that everybody loves higher returns. The question is whether you also like higher risk or not. Loosely speaking, if you dislike risk, you are risk-averse. Now suppose in the equilibrium (basically what we observe in ... 2 Risk aversion measures the degree to which someone prefers a sure thing to a gamble. If people are risk-averse that means they would, all else equal, prefer sure return to risky return, even if the expected return is the same. For example, a risk-averse person would rather invest into an asset that yields \$50 with certainty than in an asset that would have ...

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You are right that these questions have complicated answers, so i will put foward some simpler points that may help understand the situation: Your argument that the capital gains tax is a reallocation of wealth from private to public sector is not wrong, but your conclusion that "the amount of investment in the economy will not change because the ...

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That idea does not work empirically or theoretically. This is not to say that one cannot make some arguments for non-zero capital taxes but not via this channel. Empirically: Capital taxation is actually associated with higher government debt. This is not to say they cause each other rather they are both driven by discount factor of the government (e.g. see ...

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Does savings always equal investment? If we are talking about national accounts then yes. Output of closed economy is given by: $$Y = C+I+G \tag{1}$$ Private saving $S_p$ is by definition is disposable that is not consumed (see further explanation in Blanchard et al. Macroeconomics an European Perspective pp 55) so: $$S_p= Y- T-C \tag{2}$$ Public saving $... 1 I am answering this both as a PhD in economics and as a Certified Accountant (I am both). This quote for the wikipedia page is garbage, because it comes after the article has correctly informed the reader that CFC is an estimate that attempts to capture the economic reality rather than the accounting convention as regards consumption of capital for ... 1 Mortgage rate data: FRED page. The mortgage rate did move at various points in 2008, so the premise that they did not change appears incorrect. However, I can answer how they are priced. The easiest way to view mortgage rates is that they track the rates of mortgages traded in mortgage-backed securities. The fair value of their yields depend on the riskiness ... 1 No under expenditure approach neither salary or wages are directly counted. An expenditure approach to GDP calculates GDP as follows: $$GDP=C+I+G+NX$$ Where$C$is consumer spending on final goods and services at market prices,$I$is the investment spending,$G$is government spending and$NX\$ are net exports. All wages and salaries are of course indirectly ...

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One thing that could be made more explicit is that the capital is presumably for export employment and the existence of these employees will require additional local employment. Export employment is a job that produces a product for outside the city, local employment produces a good/service internal to the city. To use your example, if a car factory brings ...

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