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Critically comment on the following statements as they refer to middle-income developing countries (1 page )...

Critically comment on the following statements as they refer to middle-income developing countries (1 page )

"Savings do not determine investment; rather investments determines savings"

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Answer #1

Savings and investment both are functions of the interest rate. Saving directly related to the interest rate higher the interest rate higher will be the saving another hand, investment indirectly related to the interest rate higher the interest rate lower the investment and lower the interest rate higher the investment in the economy.

In the context of the middle-income group institutional factors are more powerful than the economic theory. Under such situation above statement is valid saving mobilization is very low due to not well organized financial institutions, low income, and powerful institutional factors.

Under such situation government investment on infrastructure development, financial required for economic growth and capital formation.

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