Answer to Question #256879 in Microeconomics for Ceilo Lily

Question

suppose that decide to reduce consumption and increase investment

a. how would this change affect economic growth.

b.what groups in society would benefit from this change what groups might be hurt?

Answer 1

When consumption is reduced, savings tends to increase. In this case, the investment will grow making the business to expand. When the business expand more revenue for the economy is gained, hence economic growth.

Reducing consumption may heart the elderly groups who need more food. However, creating more opportunities by expanding the business may benefit the youth to gain job opportunities.