Meaning of Saving in Economic Discussion
Saving is a word you are guaranteed to misunderstand unless you make the effort to see the point.
Saving in everyone’s mind is about individuals putting money in the bank or keeping a store of money in some financial institution for later use.
Thinking only in that way will ensure that you never understand how economies work.Unlike an individual, a nation cannot save by putting money in the bank or keeping a store of cash and credit on hand.
National saving, the only kind of saving that is of interest if we are discussing the national economy, is the use of a nation’s resources in productive ways.
In an economy Opens in new window, the resources available can be used to produce consumption goods or they can be used to produce investment goods.
A nation saves when it is investing and not when it is consuming.