How much money should be saved in an economy and how much should be invested in capital

How much money should be saved in an economy and how much should be invested in capital

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Unformatted text preview: How much money should be saved in an economy and how much should be invested in capital? This question is difficult to answer. Some countries, like Japan, have very high savings rates. Others, like the US, have very low savings rates. In both cases, the exact effect on the growth of productivity is unclear. In general, the savings rate that corresponds to the golden rule level of capital is considered optimal. This is defined as the savings rate that maintains the level of capital associated with the higher per worker consumption rate. In general, a savings rate that is as high as possible without significantly reducing the standard of living of the population is desirable. Regardless of the savings rate, expenditures on capital directly affect the growth rate of an economy. They inject the economy with new tools, machinery, and training. These an economy....
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.

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