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By summarizing the main arguments of the topic: Changes in Savings, The Effects of Fiscal Policy (An increase in Government Purchase - Essay Example

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Savings refer to the process through which an individual or state decides to defer consumption in order to keep the deferred consumption in the form of asset. Savings can be in the form of increased bank deposit increase in cash holdings, or purchase of securities. There are…
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By summarizing the main arguments of the topic: Changes in Savings, The Effects of Fiscal Policy (An increase in Government Purchase
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By summarizing the main arguments of the topic: Changes in Savings, The Effects of Fiscal Policy (An increase in Government Purchase

Download file to see previous pages... An increase in savings translates into low investment opportunities and an increase in productive wealth, whereas a decrease in savings suggest there is a heavy investment leading to high production capacity (Mankiw 72). However, national accounts tend to keep the balance between savings and investment in order to maintain economic stability.
Fiscal policy is a measure that governments undertake in ensuring economic stability within a nation. An increase in government spending has a significant role in the economy as it takes a vast range of forms such as wages, social security benefits, infrastructure, and government employees among others. An increase in government purchases implies that the state assets are transferred to the public for economic development purposes. An increase in government spending leads into the creation of jobs and wages through government services and development projects. As a result, increasing government purchases results into more wealth to the public and high national income or output (Mankiw 73). The state employs fiscal policy, government purchases, in regulating national output. Therefore, an increase in government purchase results into a positive impact on the ...Download file to see next pagesRead More
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