Question

How would the following changes influence the rate of investment in the United States? 1. an...

How would the following changes influence the rate of investment in the United States?

1. an increase in the share of the population in age groups with high saving rate

2. improved investment opportunities in Europe

Homework Answers

Answer #1

Answer: The following changes influence the rate of investment in the US:

1) An increase in the share of the population in age groups with high saving rate: Age structure of the country may affect the demand for investment. saving is vital to the country's economic health, both at the household and firm-level.

  • A rise in the savings ratio can have a very significant impact on the economy as when people save more it enables the bank to lend more as they are getting more deposits.
  • country can see higher sustainable growth in the future.
  • a higher saving can lead US companies to lend more to overseas markets, stronger US external position.
  • more the savings, more the investment.
  • Higher savings, in the long run, may lead to an increase in GDP.
  • saving enables an increase in investment without worsening of the US's foreign borrowing position.
  • the nation's physical capital stock grows more quickly and the economy is able to maintain a faster pace of growth.

(2) Improves investment opportunities in Europe may influence the rate of investment in the US:

  • Investment levels are influenced by the interest rate, economic growth, expectations, technological development, availability of finance from the bank, and other govt. policies
  • All these factors are going on aright track in Europe that's a reason their investment opportunity gas increased now this creates competition for the US.
  • As people all over the world are more likely to go for jobs in Europe and more business will flourish in the US.
  • Share market will boost in Europe that might hamper US shares in the market.
  • people will move from the US to Europe for real estate properties.
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