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What are the Importance of consumption and savings in economics?
Wiki User
∙ 13y ago
Consumption/saving ratio tells us about the economic activity going on in the country.If consumption would increase this would mean that there is more production of output and economic activity is at boom.On the other hand if saving would increase there would be a decrease in the rate of interest which will further boost the economy.
2.Rise in C/S ration would mean that there is more production due to more consumption so output would increase and DEMAND PULL INFLATION would also increase.
3.Fall in C/S ratio would mean less production and unpredictable inflation.
4.Really sorry for not drawing the aggregate demand-aggregate supply diagram to support my answer.
Source(s):Self studyWiki User
∙ 13y ago
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