What can be the incentives for capital investment

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The value of $100 in 1982 is the base; $100.

In 1982 you put $100 in a savings account that paid you 5% interest annually, which was reinvested.

Twenty years later, 2002, this account had increased to $265. However, the CPI increased to 186. What would be the value (purchasing power) of $265 in 2002?

What was your gain (or loss) for saving?

What if taxes on interest income were 10%. How would this affect the incentives for saving?

In economics, it is agreed that Investment, especially capital investment, leads to economic growth. The source of Investment is from savings. What conclusions can you draw about the incentives for capital investment and economic growth with the above facts about the CPI?

Reference no: EM13222973

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