Think about the amount of saving that you do. How much of your disposable income do you save? Is it a positive amount or a negative amount? If you save a positive amount, what do you do with your savings? Do you put them in a bank, in the stock market, in bonds, or just keep money at home? What is the interest rate you earn on your savings? If you save a negative amount, just what does that mean? It means that you have a deficit (like a government deficit). You’re spending more than your disposable income. In this case, how do you finance your deficit? Do you get a student loan? Do you run up an outstanding credit card balance? How much do you pay to finance your negative saving (your dissaving)? How do you think your saving will change when you graduate and get a better-paying job? Also think about the amount of investment that you do. You are investing in your human capital by being in school. What is this investment costing you? How are you financing this investment? When you graduate and start a well-paying job, you will need to decide whether to buy an apartment or a house or to rent your home. How would you make a decision whether to buy or rent a home? Would it be smart to borrow $300,000 to finance the purchase of a home? How would the interest rate influence your decision? These examples show just some of the many decisions and transactions you will make in the loanable funds marketthe link between your saving and your investment.Question Discuss how your expected and disposable future income, after receiving your college degree, may change your saving and investment decisions and transactions in the loanable funds market.
Think about the amount of saving that you do. How much of your disposable income do you save? Is it a positive amount or a negative amount?
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