Question

ECO 202 Week 2 Group Discussion Questions. Each group will present a PowerPoint response to the following topics on Monday, September 30.

Group 1. Why is there a trade-off between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in the future? Why can’t people enjoy more of both? How does saving relate to investment and thus to economic growth? What role do banks and other financial institutions play in aiding the growth process?

we choose Singapore for the market of this question! so the answer s

Answer 1

Income is fixed. A consumer has to choose between consuming it today or saving it for future consumption. This means more he consumes today, less is available for savings and thus less is available for future consumption.

This means there is a tradeoff between the amount of consumption that people can enjoy today and the amount of consumption that they can enjoy in future.

People cant enjoy more of both because they have fixed incomes which they can only spend on both the goods. Bringing up one means less of other is left.

Savings made by households for future consumption is done in banks and other financial institutions to earn interest income. Banks then give out these savings to businesses as Investment who need this money for investment purposes. This means in equilibrium, savings equal Investment.

Higher the savings, higher the businesses use this money for investment, which means higher business Investment, higher production and thus higher economic growth.

Banks and financial institutions lend out money to businesses and investors who use this money to make more money, thereby leading to economic growth.