Macro economics Essay Example | Topics and Well Written Essays - 2750 words - 1

Macro economics - Essay Example This essay aims at explaining how fall in household savings can have a negative effect on the UK macro economy. Savings kept in bank accounts are key part of money. To the extent banks decide to finance commercial investment with respect to amount of deposits they receive, an increased personal savings could raise investment by the established international organization. If money deposited is changed in equity subscription in ones own secure, savings serve for personal independence and careers, again with a possible connection to investment in a macro-economic sense. Invested in the Treasury bonds, and savings finance public expenditure inform of shares, they may directly or indirectly fund the firms. Savings may also be transfer overseas by remittances, leading to rise to a new option between savings and consumption. For instance, in the form of buying an existing house or in funds on entrepreneurial activity). Insufficient and minimized savings due to a deliberate policy to promote the growth of GDP by independent consumption alone can reduce, if the policy is only feebly effective, the national economy capability to absorb treasury bonds, which in certain circumstances may put the country under high pressure by foreign creditors, when public debt is huge and prevalently held by foreigners (Swan, 2007). The paradox of thrift remains an important idea from the Keynesian economics. Reduced saving is observed as negative because it does not provides the money to finance the capital investments needed to promote a long-term economic growth. But if many people in UK start saving more in the same time, it may causes a drop in the consumer demand and even deeper recession. What can be rational and good for an individual can be damaging for whole economy at large, Monetary easing (ME) is a type of monetary policy used by central banks, whereby it purchases financial assets from existing commercial banks and other private financial