Savings vs. Money: Which is More Important?

by Frank Shostak

Conventional wisdom holds that savings is the amount of money left after monetary income was used for consumer outlays. Hence, for a given outlay, an increase in money income implies more savings and thus more funding for investment. This in turn sets the platform for higher economic growth.

Following this logic, one could also establish that increases in money supply are beneficial to the entire process of capital formation and economic growth. (Note: increases in money supply result in increases in monetary income and this, for a given consumer outlay, implies an increase in savings).

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