Answer to Question #250970 in Macroeconomics for Smiley

Question

Please explain in three well-structured paragraphs the impact of a change in the savings rate on the output.

Answer 1

In countries where citizens have higher rates of savings the economic growth of that country is higher than those with lower saving rates. When people saves they create opportunities. The amount of money saved becomes capital for developing and investing in other areas. This is possible when investors approach banks and request for loans to fund projects. Without capital accumulation or savings this would not be possible. When a change in saving rate in output occurs a person can choose to purchase more assets. For example farm machineries such as tractors that would improve their earnings. A change of saving rate in output is beneficial to the farmer. One of the benefit is that the farmer is able to create more opportunities and produce more yields.