Question

Directions for the Discussion Board participation You are required to respond to the question of the week using at least 200 words by day 3. On day 4, it is required to answer to at least two of your peers using at least 200 words to what they have posted by using economic concepts that you have learned and providing examples of your own, asking questions, telling about what you agree or disagree. Please avoid filling your response using repeating statements, praising or completely agreeing with someone else point of view. In short, I would like to see an in-depth analysis. Please refer to the syllabus and the rubrics for the Discussion Board. Please answer the following. The national savings rate in the United States is far lower than Japan (by some estimates, approximately 4% versus 20%). In your opinion, is this a good thing or a bad thing? How do the saving rates affect economic activities? Support your points by using the loanable fund market and other economic tools that you have learned in this class.

Answer 1

The national savings rate in the United States is significantly lower than Japan. From an economic perspective, a higher savings rate has several advantages, and a lower rate has its disadvantages. I believe a higher savings rate is beneficial for an economy, and the U.S. should work towards increasing its savings rate.

Step-by-step explanation:

Firstly, a higher savings rate means more funds are available for investment. In a loanable fund market, the supply of loanable funds comes from saving, and the demand for loanable funds comes from investment. When the savings rate is low, the supply of loanable funds is also low, making it harder for firms to borrow and invest in their businesses. On the other hand, when the savings rate is high, the supply of loanable funds is also high, leading to lower interest rates and more investment.

Secondly, a higher savings rate can lead to higher economic growth. Investment in capital goods increases the productivity of workers, leading to higher output and wages. In the long run, higher economic growth means higher standards of living for citizens.

Finally, a higher savings rate provides a cushion against economic shocks. If a recession hits, firms with high savings can continue to operate while their competitors struggle or go out of business. This can lead to a more stable economy overall.

In conclusion, a higher savings rate is beneficial for an economy. The U.S. should strive to increase its savings rate to encourage investment, promote economic growth, and provide a cushion against economic shocks.