Essay: Macroeconomics-Excessive savings

12 Oct

Essay: Macroeconomics-Excessive savings

Sample Essay

This parameter is well captured by economists who still rely on the Keynes hypothesis or theories. He argued  that excessive savings more than anticipated will result in accumulated amounts of money in saving accounts which posses a very serious calamity. It may encourage recession and can lead to depression in an economy.

Any economy would decline if the savings continue increasing since it creates a decrease in investments. Market pessimism and crumbling consumer demand (Blinder17). Economist should use this theories possibility and avoid a style of saving in excess since it avails more money for lending by the responsible government thus increasing currency supply that can lead to currency inflation.

Budget deficits have been thorny issue in the business flesh of many nations. They result in very serious problems in the trade of such countries by creating trade and budget deficits. The two are mostly experienced separately as each of them may result or lead to the other (Arnold 9). This means that a budget deficit can result to a trade deficit and trade deficits can result into budget deficit. There are however different cases where the two can occur independently or can be pulling in different directions (64).

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