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Savings and investment

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Savings and investment

  1. 1. Contents Meaning of saving Types of saving Factor effecting level of saving Meaning of investment Importance of investment Factors effecting of investment Causes of low rate of saving & investment in India Suggestions to increase
  2. 2. Savings are that part of our income that we do not spend. S = Y - C Savings means: Depositing cash in a safe place Having minimal return and Less risk Short term needs & emergencies
  3. 3. To have money available to buy something in the future. To have money available for unexpected bills. To have an income when they retire.
  4. 4. 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
  5. 5. Unforeseen emergencies Status in society Financial independence Business motive Income level
  6. 6. 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
  7. 7. 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
  8. 8. Increase in demand & supply Technical progress Creation of infrastruct ure Economic welfare Increase in employment
  9. 9. Rate of interest Government policies Government spending on infrastructure Research & technological advancements Banking facilities Tax incentives on saving
  10. 10. Vicious circle of poverty Low per capita income Inflation & lack of demand Lack of infrastructure Heavy taxation
  11. 11. Expansion of banking institutions Reduction in import duty for capital goods Promote rural savings Control on population Strengthening infrastructure Imposing agricultural income tax
  12. 12. 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.
  13. 13. 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.

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