Questions tagged [saving]

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3
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1answer
47 views

What cognitive biases reduce savings?

In Thinking Fast and Slow Kahneman explains that people can sometimes save less because they underestimate the future benefit to themselves because they view present and future self differently. I ...
0
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1answer
36 views

Why doesn't national savings, in aggregate, always equal to zero in monetary terms?

Referring to this question and this one Imagine you had a closed economy with two people and they both started off with $100 dollars. How would net savings in aggregate ever not be zero? Anything ...
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1answer
48 views

How does the US have gross national savings while running a trade deficit?

If a country has a positive savings rate, that means that more money had to come into the country from somewhere outside of the country. However, we run a trade deficit, so we're actually sending more ...
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1answer
21 views

Does savings always equal investment? Are there any cases where savings could be removed from the economic system altogether and break the balance?

Assuming a closed economy, does savings always have to equal investment? If an individual produces a certain amount of a resource and saves it, that becomes part of the savings of the economy. However,...
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0answers
53 views

Small Open Economy Without Government

Suppose we have an economy with a representative consumer with the following utility function: $$U=\sum_{t=0}^\infty\beta^t\frac{c_t^{1-\sigma}}{1-\sigma} $$ There is no uncertainty and the household ...
2
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1answer
67 views

Modern descendants of Frank Ramsey's paper “A Mathematical Theory of Saving”?

I haven't studied economics, but I'm interested in applied ethics, and I came across Frank Ramsey's paper "A Mathematical Theory of Saving". I thought his application of calculus to a ...
2
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1answer
89 views

Why is saved money sitting on a bank account bad for the economy?

I've seen several news that were concerned about effect of the unspend savings that just sits on a bank account to the global economy. Given that bank uses to money invest in things, or simply lend ...
0
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1answer
17 views

Perfectly functioning credit markets and consumer saving

Today in my Macroeconomics lecture, while covering the Real Intertemporal Model with Investment (Chapter 11 of Williamson's Macroeconomics), my professor proponed that a key assumption to not make ...
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1answer
30 views

Solow model and a change in the savings rate

In the solow model why does an increase in the savings rate shift the investment curve instead of move along it? Intuitively not mathematically Thanks
2
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2answers
39 views

Why does a rise in the savings rate result in an increase in the capital stock intuitively?

I understand mathematically how it works. But what is the actual process intuitively. Thanks
2
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1answer
93 views

What are the household holdings of financial products in China?

What are the household holdings of financial products in China? It seems to be generally accepted that real estate is the most popular savings product for households in China and perhaps it is also ...
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2answers
78 views

Where does investment originate from in the circular flow model?

The above image is from my macroeconomics textbook. I’m struggling to understand the “financial markets” corner. If financial markets refers to banking and perhaps the stock market, is it true that ...
7
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3answers
555 views

What would be the economic effect of widespread instances of individuals paying off consumer debt?

In light of the economic impact of the recent shutdowns in response to COVID-19, the Australian Government is considering bringing forward planned tax cuts, that were do to be implemented gradually ...
5
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2answers
306 views

Keynes' conception of investment

Keynes defines saving as equal to investment, saying: "Having now defined both income and consumption, the definition of saving, which is the excess of income over consumption, naturally follows ....
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0answers
22 views

How do personal finance banking apps make money?

There are a bunch of apps and start ups, like Qapital and Varo that helps you save money. Some of them has monthly fees, but not all of them. How else could a company like that make any profit, if ...
3
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1answer
65 views

How can a government save, if it has deficit?

I am reading an IMF paper about China's debt (link) which says: ❝ Despite a large augmented fiscal deficit of 10 percent, fiscal savings remain higher than other countries, resulting from the biased ...
2
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2answers
125 views

In an intertemporal (2-period) consumption model, why is the investment rate independent of discount factor?

In lecture, my professor defined the following 2-period consumption model: $c_i = $ consumption in period $i$. $y =$ endowed income in period 1. $r = $ interest rate in perfect credit markets. $h = $ ...
2
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4answers
238 views

How can people save in a equilibrium economy?

Two people on a desert island: John produces 100kg potatoes and sells them to Paul for \$100. Paul catches 100kg fish and sells it to John for \$100. GDP is \$200\$, right? Next year, they improve ...
0
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2answers
39 views

Benchmarking an Energy Investment

I am currently working on a calculation to see whether it is economically feasible for a household to invest in an energy retrofit. I obtain a total profit of around $13\%$ over the lifetime of the ...
1
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1answer
112 views

Does a negative interest decrease the money supply?

If there is less money, its value increases. There is less liquidity when there is less money. Does a negative interest decrease the money supply? Especially when people don't need money: they saved ...
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0answers
19 views

Relationship b/w consumption & increase in interest rate

Please help me clarify this- Case 1 - If interest rates increase then people will save more to reap the benefits and will cut down on their consumption(C) so Consumption will fall. Case 2 - Due to ...
2
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0answers
25 views

Net saving as a percentage of net income

In "Is Piketty's Second Law of capital fundamental?" by Per Krusell and Anthony A. Smith Jr the authors say, in a footnote: Specifically, from the FRED database, we use series A023RX1A020NBEA on ...
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0answers
22 views

lifetime consumption explained

The formula for today's consumption is defined as: $$C = Y - T -S^P $$ That being said the consumption of tomorrow is: $$C' = Y' - T' + S^P(1+r)$$ Could anyone possibly explain to me why the ...
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0answers
30 views

Are corporate savings deflationary?

Example: Apple. People "overpay" for their products, money that ends up in corporate savings and not in their competitors' coffers, sort of a black hole because Apple doesn't see enough investment ...
2
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1answer
54 views

How does a govt surplus increases investment?

From the closed economy equilibrium condition $I = S + (T - G)$, how does exactly a surplus (which I assume would be used for paying debt) increases investment in the same amount? I ask that because ...
1
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1answer
259 views

If saving equals investment, can there ever be a stock of savings?

National product accounting identities imply $S=I$. Since these are flow quantities, everything saved in a particular period is invested, thus there is never an accumulated stock of savings. Is this ...
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1answer
46 views

Tax Cuts Affect on Economy?

If we look at the equation for national Savings = S(priv) + S(pub) = [Y-C+Tran-T] + [T-G-Tran] = Y - C - G . We see that Tax falls out of the equation. Therefore, does that mean changes in taxation ...
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1answer
18 views

is there a way in NIPA accounts to see a measure of size/change in private debt stock?

is there a way in NIPA accounts to see a measure of size/change in private debt stock , and how is it measured? if not then how is it measured?
3
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1answer
81 views

Why don't we draw National Income Curve(45 deg. line) simultaneously with graph for Saving Function?

When we talk about Consumption Function , we draw the 45 degree line of Income or Aggregate supply curve simultaneously. But while graphing saving function , we don't show Income curve (45 deg. line) ...
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1answer
39 views

falling household savings

While reading Mazzucato's "The value of everything", I come across this The rise in private debt in the US and UK has resulted in household savings falling as a percentage of disposable income - ...
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1answer
299 views

GDP Calculation and treatment of Personal Savings

While calculating GDP of nation, how personal savings which is not invested in economy or has become part mandatory reserve ratio of government is treated? Similarly do we include import and export of ...
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0answers
74 views

How Africans use their wages?

I was researching poverty in Africa and was reading about their daily wages. Based on the article linked, 2/3 of Africans live on less than $1.25 USD, a day. However, what this article and many ...
5
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1answer
96 views

Does savings lead to investment in physical capital?

In the introductory macroecon textbook I'm reading, it's made clear that savings=investment. Mathematically, this makes sense to me. However, I'm having trouble understanding the qualitative ...
2
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1answer
549 views

Intuition Behind the Definition of Prudence?

I'm having trouble seeing why an agent is said to exhibit "prudence" when u'''($\cdot$) > 0. How does having a utility function with a strictly positive third derivative make an agent act "prudently"? ...
4
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1answer
8k views

What's the difference between the Life Cycle Hypothesis and Permanent Income Hypothesis?

Would it be correct to say that the Permanent Income Hypothesis (PIH) stipulates that current consumption decisions are made based on future income projections/expectations, while the Life Cycle ...
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0answers
69 views

Monthly savings plans

Monthly savings plans in stocks or funds are typical investments for many people. On aggregate, these plans generate a large demand on the underlying assets, often around the end/beginning of a month. ...
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1answer
45 views

Change in optimal savings due to increased risk

Currently I am working out advanced micro problems that deal with household's optimal savings behavior. Although I think I understand the material quite well, I am not sure about the specific detail ...
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2answers
741 views

What is the actual paradox in the Paradox of Thrift?

I understand most of the reasoning, but don't understand what the actual paradox here is, as I believe there can be up to three potential paradoxes: individuals increase savings when they should be ...
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1answer
33 views

Is lowered probability of spending equals savings? [closed]

This a really basic one and logic says: Yes given enough iterations. But I am looking for validation Situation: There is a 7% probability of expenses of 1000 occurring. I have a tool that then ...
0
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1answer
317 views

Why the GDP does not decrease even when we are saving from our income?

When we are saving from our income then we don't consume as mush as we earn. So the GDP should decrease as well as the income but this does not happen. Why?
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1answer
192 views

Is investment a type of saving or expenditure

I am confused that if investment is a type of saving or a expenditure .if investment is a type of expenditure then is saving is what is left after subtracting consumption and investment from income
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0answers
67 views

Locating Sweden's Net Savings Rate, Public Saving, Private Saving, and Corporate Savings Rates?

I'm looking at the savings rates for Sweden and would first like to better understand the breakdown between Gross National Savings, and Net Savings? I've looked around and still haven't found an ...
2
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3answers
106 views

Is there an economic theory of why people like to hold on to wealth?

It seems to me that many people work to become wealthy, but not because they want to consume all that wealth. Many people give it away, other's don't, but still they do not spend it. You hear about ...
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2answers
213 views

Can savings and poverty coexist?

Many governments try to decrease savings in the economy so that recessions do not occur. Does it make sense for savings and poverty to coexist though at significant scales? Let's say a population was ...
5
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1answer
517 views

Does dollar cost averaging actually have any advantage over one time investment?

Some banks promote savings plans by stating that investing a fixed amount of money in regular time intervals minimizes the average buying price or the downside risk (dollar cost averaging). Since the ...
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0answers
38 views

How does Global Saving Glut flood the market with cash?

When I was browsing the internet last night, I read a couple articles on the Global Saving Glut. And many has ascribed it to be a cause of US financial crsis. My question is how so? The articles argue ...
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3answers
85 views

Diagram with axes $r$ and $S,I$

In the figure below, I have a coordinate system where $r$ depends on $I$ or $S$, but I do not completely understand why I can have multiple functions inside this coordinate system. Why can I write $S(...
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4answers
14k views

Why does savings equal investment (scenario)?

Scenario 1: There's an economy of two people (Joe and Amanda). Joe buys a 500 dollar car from Amanda (which she made herself from raw materials in her back yard). Amanda takes the 500 dollars and ...
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0answers
47 views

High interest rates=High savings?

My intuition tells me that an increase in interest rates will make saving more attractive and should encourage saving. But if that is the case, why the MPS( marginal propensity of saving )doesn't ...
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2answers
137 views

What's the actual relationship between deflation, spending and saving?

I am pretty confused with this concept. Since deflation is a result of decreasing prices, it means that the demand for goods and services rise therefore stimulating more spending. But on the other ...