Gross domestic savings, Macroeconomics

 

Gross Domestic Savings 

Income not devoted to current consumption is saved. In an economy during a particular year some units will consume less than their income while some will spend more than their income. Gross domestic savings is the difference between GDP and aggregate consumption.It is interesting to note that while most of the consumption can be attributed to the household sector, saving is done by various sectors of the economy. This is because part of the income generated in the productive process does not reach the households. Retained profits remain with the business units where they are generated. They constitute part of 'business savings'. Government takes away some income in the form of taxes which constitutes bulk of government revenue. By not spending all of it on current goods and services government can generate savings. Gross Domestic Savings is the total of savings done by all sectors of the economy.The relationship between aggregate savings (S) and income (Y) is known as the saving function, i.e. S = S(Y). Saving may be related to either national or disposable income. The properties of the saving function are the inverse of those of the consumption function, since Y = C + S. 

Posted Date: 9/11/2012 5:41:59 AM | Location : United States







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