Read the article at the following link httpwwwwashingtonpost

Read the article at the following link:

http://www.washingtonpost.com/business/economy/a-familiar-economic-trend-in-america-spending-up-saving-down/2013/12/26/c916c814-6e72-11e3-a523-fe73f0ff6b8d_story.html (copy and paste the link into browser)

After reading the article and reviewing the information on consumption, savings, and investment.

1.) What does this decrease in the savings rate mean for the continued growth of the US economy?

2.) Do you think this is a good thing or a bad?

3.) What will this mean for the role of government in the future growth of the economy? Be sure to explain your position.

Solution

Ans

1 usa economy will experience less growth because we are consuming too much presently without providing sufficient for future in the form of investment

2 This is a bad thing. We should care about long term growth, investment on Rand D etc.

3 This will mean Govt has to step in It has to promote savings and investment aggressively. Not only that in absence of sufficient private investment it will have to invest in RandD, human capital, roads, dams etc. Only then growth can be maintained