Answer to Question #89086 in Macroeconomics for Qwuaky Daniel

Question

why is a high saving ratio not a requirement for funding a high ratio of investment to to GDP over the longer term?

Answer 1

because in reality savings are not equal to investments.

1. The public may keep their savings at home in a safe. and such savings are not investments and may not be investments in the future.

2. if people start saving more - that is, they spend less, enterprises will have less revenue, and the economy as a whole will decline, rather than grow