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PARADOX OF SAVING
PRESENTED BY :
Deven-16Jigna-03
Vibhuti-47Palak-13
Anuja-18Nitin-17
John Maynard Keynes
The paradox of thrift states that during a recession, an increase in planned savings (the marginal propensity to save increases) can cause actual savings and investment to decrease.
SAVINGS
Process of putting cash aside safely
Eg: gvt securities/bonds, saving a/c’s, FD’s
INVESTMENT
Process of buying assets
Eg: shares, gold, property, stocks, investing in any small business
SAVINGS INVESTMENT
Advantages
Peace of mind Future saving
Earns interest Grows at good rate
Monetary safety Higher returns
Disadvantages
Less returns Higher risk
Flow of money contracts Not available at moment
The pie-chart below shows the average holdings of financial assets by Indian households between 2000-01 and 2010-11
Saving In Banks
Saving is related to inflation
SavingIn Banks
Banks Lend Money To Business
Production&
Employment
More Money In Hands Of People
More Money Will Be Spent
Non-SavingBanks Will Have Lesser Money
Banks Will Not Be Able To Lend
Production Reduces
Unemployment
Recession
SAVING IS RELATED TO RECESSION
Hoarding doesn’t help the economy.
BEFORE 1991…
History of savings and investments before 1991.
Keynes contribution towards savings before 1991.
Keynes theory.
AFTER 1991...
Liberalization, privatization, globalization…
Changes after 1991 in Indian economy of savings and investments..
“Paradox of saving” is an
assumption
It’s good or bad for economy
Saving & investments are going
in cycle process
Saving leads to recession