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Income and Expenses. Income. Income from work A. Wage – money paid by the hour or unit of production. B. Salary – money paid on a weekly, monthly, or yearly basis. . Income from Wealth.
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Income • Income from work • A. Wage – money paid by the hour or unit of • production. • B. Salary – money paid on a weekly, monthly, • or yearly basis.
Income from Wealth • Wealth – the value of the things you own: house, car, belongings, bank accounts, savings, investments. • Net worth – an individuals wealth after debts and other obligations have been subtracted. • Wealth can be used to earn money.
Examples • Rent – payment for use of someone elses property. • Interest – income from allowing someone else to use your financial capital.
Wealth Accumulation • Influenced by several factors • Disposable income – take home pay after taxes. • Income – when income increases people save and invest more. Less when income decreases. • Expectations – When expectations are high people spend more and save less. When expectations are low people save more.
Current interest rates – higher interest rates promote savings. • Taxes – tax rates on income from savings and investments can encourage or discourage savings.
The Dilemma • Banks, insurance companies, stock brokerages try to persuade people to save or invest money. • Businesses want you to spend more. • You must decide what things to buy and also whether to save and invest.
Question • In the current economic situation, do you think people should be spending more or saving more? Explain your answer based on what you have learned so far about the economy.