A Federal Reserve publication notes: During recessions, decreases in consumption [from an increase in saving] could inhibit
Question:
A Federal Reserve publication notes:
During recessions, decreases in consumption [from an increase in saving] could inhibit economic recovery. However, in the long run, the accumulated money from individual savers is available for capital investment, a situation where businesses borrow to purchase capital (e.g., machinery and technology).
a. Briefly explain why decreases in consumption might inhibit economic recovery. Illustrate your answer with an AD–AS graph.
b. Use an AD–AS graph to illustrate the effect on the economy in the long run of the increase in saving described in the second sentence of the quotation.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Money Banking And The Financial System
ISBN: 1801
3rd Edition
Authors: R. Glenn Hubbard, Anthony Patrick O'Brien
Question Posted: