Relation between money - wealth and income, Macroeconomics

Q. Relation between Money - wealth and income?

Money isn't the same as wealth. An individual may be very wealthy however have no money (for instance by owning stocks and real estate). Another individual may have a lot of money however no wealth. This would be the case if an individual with no wealth borrows money from a bank. She will have money (for instance in the form of a deposit in the bank) however no wealth because this deposit exactly matches the outstanding debt. Be careful with this distinction: do not say 'Anna has a lot of money' if you mean that Anna is wealthy.

Money is not same as income and income is not same as wealth. Income is a flow (for instance it is currency units per month) whereas wealth or money is a stock (measured at a certain point in time). Again, it's very possible to have a high income though no money and no wealth, or to be very wealthy and have a lot of money however no income. This is another distinction to be careful with. Do not say that 'Sam makes a lot of money' if you mean that Sam has a high income. Money has a very specific definition in economics!

Posted Date: 8/13/2013 2:55:05 AM | Location : United States

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