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How high rates of saving and investment can boost economic growth ?

How high rates of saving and investment can boost economic growth ?
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Answer #1

The level of savings has a direct impact on levels of investment. A high rate of savings in the countries will facilitate the investment process; and the natural consequence of this process is the rise in the investment level that will improve the productivity and boost economic growth.

Investment influences the economic growth rate because it is a main component of aggregate demand (AD) and hence influences the productive capacity of the economy. An increase in investment will help to boost aggregate demand and short-run economic growth. Moreover increase investment means more expenditure on capital spending, such as buying new machines, buying robots to enable automation, building bigger factories, thus enhance the productivity and economic growth

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