paradox of saving

PARADOX OF SAVING

PRESENTED BY :

Deven-16Jigna-03

Vibhuti-47Palak-13

Anuja-18Nitin-17

John Maynard Keynes

The paradox of thrift states that during a recession, an increase in planned savings (the marginal propensity to save increases) can cause actual savings and investment to decrease.

SAVINGS

Process of putting cash aside safely

Eg: gvt securities/bonds, saving a/c’s, FD’s

INVESTMENT

Process of buying assets

Eg: shares, gold, property, stocks, investing in any small business

SAVINGS INVESTMENT

Advantages

Peace of mind Future saving

Earns interest Grows at good rate

Monetary safety Higher returns

Disadvantages

Less returns Higher risk

Flow of money contracts Not available at moment

The pie-chart below shows the average holdings of financial assets by Indian households between 2000-01 and 2010-11

Saving In Banks

Saving is related to inflation

SavingIn Banks

Banks Lend Money To Business

Production&

Employment

More Money In Hands Of People

More Money Will Be Spent

Non-SavingBanks Will Have Lesser Money

Banks Will Not Be Able To Lend

Production Reduces

Unemployment

Recession

SAVING IS RELATED TO RECESSION

Hoarding doesn’t help the economy.

BEFORE 1991…

History of savings and investments before 1991.

Keynes contribution towards savings before 1991.

Keynes theory.

AFTER 1991...

Liberalization, privatization, globalization…

Changes after 1991 in Indian economy of savings and investments..

“Paradox of saving” is an

assumption

It’s good or bad for economy

Saving & investments are going

in cycle process

Saving leads to recession