3. Why are savings important to economic growth?
A. Savings are used to invest in new businesses.

B. Savings make American goods more attractive to foreign buyers.

C. Money spent doesn't grow the economy.

D. Savings are in place for a "rainy day."


Student Answer: C
Answer: Incorrect

Respuesta :

D because it allows you to invest more money into things

The first alternative is correct (A).

Macroeconomic theory determines savings as one of the fundamentals of a country's economic strength. This is because countries with higher savings rates have greater investment capacity. In this way, it is concluded that these accounting identities are in fact the same foundation, that is, savings equals investment. Thus, a large savings rate promotes greater ability to invest.

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