What Is The Relationship Between Saving,investment And Economy Growth?

Question

What Is The Relationship Between Saving,investment And Economy Growth?

2 Answers

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Answer 1

In the long term, economic growth can only happen if there is investment in an economy. The investment allows the economy's production possibilities curve to move outward. This happens because firms can, for example, buy new machinery or develop new technologies when they have money to invest. These new things allow them to be more productive.

Savings are a very good source of money to be used by companies to do this kind of investment. If the people of a country can save sufficiently, the country's firms will not be dependent on foreign sources of investment.

So the relationship is that saving provides a source of money to invest. Investment allows for firms to buy new capital goods. This leads to economic growth.

Answer 2

The relationship between the three of them is as follows. This 3 economic terms can be related by order of occurance.in the sence that one happens after the other & the other follows. If individuals or firms save that means their is agreater posibility of investing in the near future.the more youn save the more you have that wil be used for investing.i.e out of the disposable income,it is either saved ,consumme or to invested. &the more the investmentment the more the chances of economy growth.