---
# System prepended metadata

title: 18. Increasing Savings & Introduction to trade
tags: [microEconomics]

---

# 18. Increasing Savings & Introduction to trade
###### tags: `microEconomics`

## Savings
saving++
-> capital supply shifts out
-> r--
-> NPV++ (inv of r)
-> investment++
=> stonks for economy

to increase saving, USA has *tax subsidy to retirement savings*

money in the bank gets taxed
-> you get $r\times (1-\tau)$
-> taxing peoples savings will cause less of it - due to substitution effect
=> don't tax any money in special accounts 

- special accounts
    - pension
    - 401k
    - IRA(individual retirement account)
- **the catch**: when you take the money out, it is taxed (duh). We still are at an advantage though, since the current money is not taxed upon, it can accumulate more money.

### Investment Strategy
- **Money Market**: pays low interest rate, but *very* safe. given by the government
- **Bond Fund**: pays low interest rate, but higher than money market. riskier
- **Stock Fund**: riskiest. you own a part of the company; so you do as well as the financial company does. pays high interest too - dividends.

Heart of the strategy: **risk return tradeoff**

Note: If you work for company X, DO NOT invest in the same company. If the company goes down, you are basically done too. Example: Enron

## International Trade

