if banks lend this extra saving to businesses, which use the funds to build new factories, how might this lead to faster growth in productivity? who do you suppose benefits from the higher productivity? Is society getting a free lunch?
2006-09-17 14:48:38 · 3 answers · asked by 450 1 in Social Science ➔ Economics
No, society isn't getting a free lunch, but the illegals are.
And if the Federal Government would quit taking so much of working class' earnings, we might be able to save something.
Right now, all earnings usually go just for living expenses, since wages have actually gone back to the seventies.
2006-09-17 14:55:04 · answer #1 · answered by Big Bear 7 · 0⤊ 0⤋
In economic, your question means a decline in marginal propensity to consume. It will cause the marginal propensity to save to increase, but reduce the multiplier effects. That means an increase in the government spending won't work to stimulate the economy. The lack of demand will cause the investment to go down. No one will go to borrow money from the banks during the bad time whatever the interest rate is.
2016-03-17 22:18:15 · answer #2 · answered by ? 4 · 0⤊ 0⤋
If Americans saves, MPC decreases, GDP decrease proportionally.
However, investment increases, thus increasing GDP by the multiplier.
In essence, it depends on the size of the multiplier of the economy.
Growth is benefited from costs of not consuming at time=0, which is now. We consume less now for the benefit for the future.
Society, thus, is not really getting a free lunch because of the money they sacrfice today.
2006-09-18 09:53:41 · answer #3 · answered by Anonymous · 1⤊ 0⤋