Correlation Between Economic Growth And Savings Essay

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2.1 The relationship between economic growth and savings
Economic growth could be defined as the increasing in value of goods and the service, which is produced by economy. The increase is realized by increasing investment and the number of investment is depends on savings.

Saving is closely related to economic growth. Some researcher claims that correlation between savings and economic growth is positive. Bebczuk (2000) states that saving is an effective way to stimulate economic growth, the reason for this point is that when savings has been increased, the investment will along with the rise of the savings, because saving is a very important condition for investment, for instance, when individual postponing consumption and saving these disposable …show more content…

On the one hand, people live in advance economic country will get a high income. When people get more disposable income, which is total income minus consumer on foods and life essential goods, people will deposit excess money into his bank account, and the amount of money is higher than people in developing country, because people live in developing country will have less sensitivity to save money, and the economic environment in developing country is more variable. On the other hand, there are two situations, first is the income for one person only could afford his life essential goods, so this person will not deposit money into bank account. Second is a person who has exceeding income, but this person may not have basic finance literacy, because he is lack of finance education, so he will not choose to save money, just because he do not know the finance activity. Therefore, the savings in developed country will higher than savings in developing country, as the result of, bête and saving and uncertainty higher than developed

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