Savings and investment

ContentsMeaning of saving

Types of saving

Factor effecting level ofsaving

Meaning of investment

Importance of investment

Factors effecting ofinvestment

Causes of low rate ofsaving & investment in India

Suggestions to increasethe rate of savings andinvestment in India

Savings are that part of our income that we do not spend.

S = Y - CSavings means:Depositing cash in a safe

placeHaving minimal return andLess risk Short term needs & emergencies

To have money available to buy something in the future.

To have money available for unexpected bills.

To have an income when they retire.

Private saving

Public saving

Private saving is the amount of income that households have left

after paying their taxes and paying for their

consumption.

Public saving is the amount of tax revenue

that the government has left after paying for its

spending.

Y – T - C T - G

Unforeseen emergencies

Status in society

Financial independence

Business motive

Income level

Investment means sacrificing some money value in the present with the expectation of making gains in the future. Investment is also known as

capital formation.

Investing means:

Purchase an assets or investment

Having a potential of high return and

High risk

Long term

People invest their money in different ways:

How much money do we need for the investment?

Is there a risk, i.e. could we lose our money?

How easy is it to turn our investment back into cash?

How much can we earn from our investment and is it worth the risk?

Buying property , e.g. a house to rent

out

Buying stock and shares

Setting up a new business

Increase in demand &

supply

Technical progress

Creation of infrastruct

ure

Economic welfare

Increase in employment

Rate of interestGovernment

policies

Government spending on

infrastructure

Research & technological advancements

Banking facilitiesTax incentives

on saving

Vicious circle of poverty

Low per capita income

Inflation & lack of demand

Lack of infrastructure

Heavy taxation

Expansion of banking institutions

Reduction in import duty for capital

goods

Promote rural savings

Control on populationStrengthening infrastructure

Imposing agricultural income

tax

1. When opening a restaurant you may need to by ovens, freezers, tables, and cash registers. Economists call these expenditures

a. capital investment.

b. investment in human capital.

c. business consumption expenditures.

d. None of the above are correct.

2. When a country saves a larger portion of its GDP, it will have

a. less investment, and so have more capital and higher productivity.

b. less investment, and so have less capital and higher productivity.

c. more investment, and so have more capital and higher productivity.

d. more investment, and so have less capital and higher productivity.

3. All of the following are high-income countries except

a. Singapore

b. U.K

c. Japan

d. South Africa

4. Lucy wants to start her own psychiatric practice, but her expenditures exceed her income. Lucy is a

a. saver who demands money from the financial system.

b. saver who supplies money to the financial system.

c. borrower who demands money from the financial system.

d. borrower who supplies money to the financial system.

5. All of the following are low-income countries except

a. United Arab Emirates.

b. Armenia.

c. Sudan.

d. Bangladesh.