Professional Documents
Culture Documents
1 Saving and investment establish relationship between them and narrate with live
examples?
Generally, Savings is income not spent, or deferred consumption.
In Economics, Savings are defined as Income minus consumption.
According to Keynesian economics, the amount left over when the cost of a person's
consumer expenditure is subtracted from the amount of disposable income that he or she
earns in a given period of time.
Generally, investment is the application of money for earning more money. Investment
also means savings or savings made through delayed consumption. According to
economics, investment is the utilization of resources in order to increase income or
production output in the future.
Investment definition according to finance, the practice of investment refers to the
buying of a financial product or any valued item with an anticipation that positive returns
will be received in the future.
The amount of savings a country has is fundamental to finance new investments that the
country may wish to undertake. Savings are also important as they benefit the economy and
in the long term, help to give a higher level of life.
One part of a country's income goes to consumption and another part goes to savings. There
is a direct relationship between savings and investment.
In every economy:
Savings = Investment
Therefore, for a company to invest more, it should consume less and save a greater part of
its income.
We are going to try and explain why there is this equality (Savings = Investment) (Let's see
if we can!).
To simplify the explanation, lets suppose that we are talking about a country that doesn't
have foreign trade (they don't export and don't import), their GDP is defined by:
Y=C+I+G
Saving or Investment?
Investment.