Question #89086

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

Expert's answer


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


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