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Encouraging Saving: Government Policies


Should a government encourage people to save more.


Public Finance and Government Intervention

Preview Answer


I. Introduction
- Definition of savings and its importance in the economy
- Brief overview of the advantages and disadvantages of savings

II. Advantages of savings
- More savings can fund investment and enable people to set up a business
- Government can make use of money in government-run saving schemes
- More savings can reduce consumer spending and lower total demand, reducing inflation
- More savings can reduce demand for imports and improve the current account position
- More savings can help people cope for future use such as retirement and education

III. Disadvantages of savings
- More savings may reduce output, increase unemployment, and cause deflation
- More savings will increase deposits at banks and may encourage them to lend to uncreditworthy customers, causing banks to collapse
- The price of luxury goods may rise

IV. Conclusion
- Summary of the advantages and disadvantages of savings
- Importance of finding a balance between saving and spending in the economy.

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