Chapter 6, Problem 21AA

To determine

To analyze: The difference between the long-term and short-terms goals of savings.

Explanation of Solution

Savings can be defines as the amount of income left after consuming commodities and services. Savings are used to fulfill the short-term and long-run goals.

Long-term goals are the something that an individual wants to do in the future. The long-term saving goals can include savings done for purchase of car or house which requires huge sum of money in the future. It may include savings done for the time of emergency like job loss or medical bills. Sometimes long-term savings are done to fulfill the basic requirements at the time of retirement.

Whereas, the short-term goals are the something that an individual wants to do in the near future. The short-term saving goals can include savings done for the payment of rent or student loan, personal consumption goods, traveling etc.