increased savings rate increases economic growth
Schweser. Session 7 pg 134. I would think that if people in the US started to save more, they would spend less, which would lead to decreased economic growth. Is Schweser saying here that since people are saving money in banks, that there is more capital for businesses to borrow, which leads to growth? Seems more like a short term decrease in growth followed by "possible" expansion. Businesses can borrow money all they like at low interest rates, but if people are increasing the savings rate they still are not spending their money on unnecessary expenses. Can someone explain this better? |