ECONOMICS
ECONOMIC GROWTH
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Low savings means there is more money put toward capital formation.
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When money is saved, it is left in the bank and not available for capital formation
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Saving provides money for investment in human and physical capital.
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When savings rise, the GDP drops, making capital formation more difficult.
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Detailed explanation-1: -A rise in aggregate savings would yield larger investments associated with higher GDP growth. As a result, the high rates of savings increase the amount of capital and lead to higher economic growth in the country.
Detailed explanation-2: -Human capital and physical capital are similar because of the fact that the development of both human capital and physical capital require an initial amount of investment, for example, to acquire human capital we spend on education, training, etc. Similarly, we need to spend money in order to possess physical capital.
Detailed explanation-3: -Human capital affects economic growth and can help to develop an economy by expanding the knowledge and skills of its people. The level of economic growth driven by consumer spending and business investment determines the amount of skilled labor needed.
Detailed explanation-4: -Investments in physical and human capital both lead to fundamental improvements in the business model and better overall decision-making.