# Tag Info

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

The seminal academic criticism of dollar cost averaging on many specifications of economic conditions is A Note on the Suboptimality of Dollar-Cost Averaging as an Investment Policy (Constantinides (...
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### Financial investment in the composition of GDP

What you're describing is a change in the capital account, not in GDP. They're related through the balance of payments, in that if a country is running a current account deficit (usually arising ...
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### Intuition Behind the Definition of Prudence?

From the Wikipedia article: Economists describe a consumer as "prudent" if he or she saves more when faced with riskier future income. This additional saving is called precautionary saving. For ...
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### Can savings and poverty coexist?

First we must address the nature of savings. Savings are not bad or good per se. It depends on the context. It is true that in the short run, increased savings will lower consumption, thereby lowering ...
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### Why does savings equal investment (scenario)?

To clarify the first scenario: you assume Joe can buy this car. However, Joe has to either earn an income (and therefore, produce something himself) or he has to dissave. In the first case, Joe has ...
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### How can a government save, if it has deficit?

Government can have savings while having deficit because we are just talking about savings not net savings. For example, imagine that government has zero tax revenue $\\\$10$spending and$\\\$10$ of ...
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### Keynes' conception of investment

The investment ($I$) equals savings ($S$) result is derived by Keynes just from national identity, as a result it just hold by definition. Keynes in the passage starts with the simplified version of ...
• 43.6k
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### What would be the economic effect of widespread instances of individuals paying off consumer debt?

This left me wondering what happens to the wider economy when people decide en masse rather than spending their disposable income on consumer goods/services, to instead pay down their debt and save/...
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The Wikipedia article has several different quotations over time, though I would state the claimed paradox as a variant of (2), possibly something like an increase in the rate of saving can lead ...
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### Diagram with axes $r$ and $S,I$

It was Alfred Marshall's doing, but based on a premise that still prevails in many parts of Economics: if prices are assumed totally elastic, then, although it may be the case that they are taken as ...
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### Investment = Saving relation in an open economy

First it should be clear that this is an (ex post) national account equality: $Y=C+I+G+NX$, the private saving is $S_p=Y-C-T$ and public saving is $S_g=T-G$ thus you have $S_p+S_g-I=NX$. Later you ...
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### If saving equals investment, can there ever be a stock of savings?

The accounting identity assumes that anything saved is an investment, i.e. something will be done with that saving in the future. It's a bit circular, I know. It's not a lagged model, i.e. there's no ...
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### Benchmarking an Energy Investment

At its simplest, you just look at the cost of capital: if the household would have to borrow to pay the debt, then what's the borrowing rate? If they are currently saving, what interest rate would ...
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### How can people save in a equilibrium economy?

The question is belied by some basic misconceptions. Just to list a few: The comparison of GDP in nominal terms and implied statements about growth. The definition/measurement of GDP (where saving is ...
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### In an intertemporal (2-period) consumption model, why is the investment rate independent of discount factor?

This idea is known as the Fisher separation theorem. Without the investment opportunity to transfer $h$ units of present day value into $w(h)$ units of future value, the perfect credit market gives us ...
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### Where does investment originate from in the circular flow model?

Investment ultimately comes from households through savings. From a macroeconomic perspective savings is equal to to investment ($S=I$). Investment comes from income because saving is portion of ...
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### Why does a rise in the savings rate result in an increase in the capital stock intuitively?

The story in the other answer is not fundamentally wrong but incomplete and bit inaccurate. Saving does actually affect capital stock through investment in Solow model (assuming based on the Solow tag ...
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### Modern descendants of Frank Ramsey's paper "A Mathematical Theory of Saving"?

If I understand correctly you are not interested just in saving but to mathematical approach to normative questions in general. This approach is actually quite common in the whole literature that uses ...
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### Investment = Saving relation in an open economy

Just to add a little more intuition, recall the difference between a small open economy and a closed economy. A closed economy must consume its endowment. A small endowment, however, can borrow and ...
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### What's the actual relationship between deflation, spending and saving?

Think about the permanent income hypothesis. People's spending is dependent not just on present income, but also the future stream of income. A deflation usually indicates a recession. The central ...
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### Diagram with axes $r$ and $S,I$

Yes, this is very counter-intuitive and confusing. However, there is an interesting explanation involving graphical analysis of demand and supply i.e. why swap axes? . I think, the explanation in that ...
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### Does savings lead to investment in physical capital?

I think that part of the blog post is just saying that savings may not equal investment in capital immediately, because there can be a delay caused by firms accumulating inventory. But firms can't ...
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### Can savings and poverty coexist?

At the level of an individual household it can be rational for poverty and savings to coexist. There are degrees of poverty. In terms of food, there is having a somewhat varied and adequate diet ...
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### Change in optimal savings due to increased risk

Your question is essentially about precautionary savings, i.e. the response of savings to risk. What determines precautionary savings is the coefficient of relative prudence: $CRP=-\frac{U'''}{U''}C$...
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### Tax Cuts Affect on Economy?

Tax falls out of the equation. Based on your model, tax can still be in the equation, but it is hidden inside of your $C$ and $G$. First, as you mentioned, if consumption is not constant, then ...
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### Benchmarking an Energy Investment

It may be more "profitable" to present your analysis here for detailed discussion. It is particularly relevant to tell us what sort of retrofit you are considering (Insulation upgrade? Triple-pane ...
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### How can people save in a equilibrium economy?

At the national (macro) level in a closed economy, total savings must equal total investment. Total savings are total output - total consumption. If there is no "savings technology" with a ...
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### How can people save in a equilibrium economy?

You dont even have to have money or other people to make transactions with to save. In economics savings is a proportion of your output/income that is not consumed. For example, you can have a ...
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### What are the household holdings of financial products in China?

I do not think there is some dataset that has such an detailed breakdown that you want. However, one of the most widely used datasets on financial assets held by households are the various national ...
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Savings in macro are equal to investment $(S=I)$. Investment is how you get new capital stock. When people save more they also by definition invest more and when they invest more there is more capital....