ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: –Saving and investing for the future reduce the amount you can spend now.-Buying on credit results in payments later and reduces the amount of future income available for spending.-Using savings for purchases results in lost interest earnings and an inability to use savings for other purposes.

Detailed explanation-2: -Saving provides a financial “backstop” for life’s uncertainties and increases feelings of security and peace of mind. Once an adequate emergency fund is established, savings can also provide the “seed money” for higher-yielding investments such as stocks, bonds, and mutual funds.

Detailed explanation-3: -Saving can also mean putting your money into products such as a bank time account (CD). Investing-using some of your money with the aim of helping to make it grow by buying assets that might increase in value, such as stocks, property or shares in a mutual fund.

Detailed explanation-4: -The income theory of money is also called saving-investment theory of money, which states that it is income that determines price and not the supply of money as stated by the quantity theory of money.

Detailed explanation-5: -Savings are important determinants of wealth. At the macroeconomic level, governments attach importance to saving money in order to make new investments, to produce new capital goods and to sustain economic growth.