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Increased savings affects economic growth primary by changing the future level of savings with respect to investment. Since savings is matched to investment and investment is used to replace and purchase capital, future investment will determine the respective level of capital development. Economic growth, being a function of the factors of production, including capital, will be changed by increased savings by having a higher level of future capital. Moreover, increasing savings can increase or decrease future economic growth, depending on the difference between current investment and required investment. When current investment falls below required investment, future economic growth increases due to a savings increase and vice-versa. Decreasing growth is possible because factors of production have diminishing returns to scale, which means that increasing levels of capital have lower returns to productivity than previous units.
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What was not a reason for post world war 2 economic growth in the US?
i think its increased savings by most americans...
What savings contribute to economic growth and prosperity?
Savings contribute to economic growth and prosperity by providing the capital necessary for investment in businesses and infrastructure. When individuals and institutions save, these funds can be channeled into productive investments, leading to increased productivity and innovation. Additionally, higher savings rates can stabilize economies by providing a cushion during downturns, fostering sustainable growth over time. Overall, savings enable the accumulation of resources that drive economic development and improve living standards.
From the standpoint of economic growth banks are important to?
channel savings into investments.
How increasing the efficiency of a system can have a positive effect on society?
Increasing the efficiency of a system can lead to cost savings, improved productivity, and reduced waste. This can translate to lower prices for consumers, increased economic growth, and a more sustainable use of resources, ultimately benefiting society as a whole.
Why are savings important to economic growth and how do they contribute to the overall prosperity of a nation?
Savings are important to economic growth because they provide funds for investment in businesses, infrastructure, and innovation. When individuals and businesses save money, banks can lend it to others who want to invest in new projects or expand existing ones. This investment leads to job creation, increased productivity, and overall economic growth. Additionally, savings help to stabilize the economy during times of uncertainty by providing a financial cushion for individuals and businesses. Overall, savings contribute to the prosperity of a nation by fueling economic development and creating opportunities for wealth accumulation and financial security.
What is effect on economy?
The effect on the economy can vary significantly based on numerous factors, including fiscal policies, consumer behavior, and global market conditions. Economic growth can lead to increased employment and higher standards of living, while recessions may result in job losses and decreased consumer spending. Additionally, inflation can erode purchasing power, affecting savings and investment. Overall, the interplay of these elements shapes economic stability and growth trajectories.
What is harrod-domar theory?
The Harrod-Domar theory is an economic model that explains how investment can lead to economic growth. It posits that the level of investment needed to achieve a certain growth rate depends on the economy's capital-output ratio and the savings rate. Essentially, it suggests that higher savings and investment lead to increased production capacity, thereby fostering economic expansion. However, it has been criticized for its simplicity and assumptions, particularly regarding the relationship between savings and investment.
How will increasing the level of domestic savings help economic growth?
Increasing domestic savings will not help economic growth. Growth requires increase in production. Saving money would mean people don't buy as much, so production will go down.
Which term explains what happens to the national economy when house hold spending exceeds savings?
The term that explains the situation when household spending exceeds savings is "consumption-driven economy." In such an economy, increased consumer spending can stimulate economic growth by driving demand for goods and services. However, if this trend continues unchecked, it may lead to increased debt levels and potential financial instability. Balancing spending and savings is crucial for long-term economic health.
Increasing economic interdependence also brings increased what?
GROWTH
What economic growth in the US in the 1950?
domestic buying increased
How has financial savings and investiment led to economic growth of developing countries?
look at financial institutions contribution towards economic growth example; loans to fund venture capital
