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Author Question: Compare and contrast the concepts of income and wealth. Are these measured as a stock or a flow? ... (Read 101 times)

fahad

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on: Jun 29, 2018
Compare and contrast the concepts of income and wealth. Are these measured as a stock or a flow? Explain.
 
  What will be an ideal response?

Question 2

What does the assumption of perfect knowledge include?
 
  What will be an ideal response?


elizabethrperez

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Wealth, or net worth, is the total value of what an entity owns minus what it owes. It is a stock measure because wealth is measured at a given point in time. Income is the sum of all wages, salaries, profits, interest and other forms of earnings for an entity over a given period of time. Because it is measured over a period of time, it is a flow measure.

Answer to Question 2

It is assumed that households possess knowledge of the qualities and prices of all goods available in the market and that firms have all available information concerning wage rates, capital costs, and output prices.


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