Answer to Question #119018 in Macroeconomics for Aynul

Question

Explain how Savings, Investment & Education can aid an economy in promoting economic growth. Discuss all the aspects that are relevant to the three mentioned parameters, if a government wants to pursue policies to promote these said parameters.

Answer 1

Capital from savings can be used in investment and help to increase production. Savings equals to the level of investment. When there is more savings there is more investment. Investment can be in terms of infrastructure, buildings, industries and education. On the other hand, investment is a component of aggregate demand hence has an impact on the rate of economic growth. Investment improves production capacity of a country hence spurring the economic growth. More investment leads to more the economic growth. Education also enhances economic growth of a country. Education increases knowledge, and understanding of people. Education helps to produce more progressive and productive human capital. Education increases creativity and innovation hence improving income distribution which helps to grow the economy of a country.