A rise in the level of saving can reduce aggregate activity temporarily but only a sustained high level of saving makes it possible to have the sustained high level of business investment that contributes to the long-run growth of output.

Summary

This quote suggests that while saving can initially decrease economic activity in the short term, it is crucial for long-term economic growth. While a temporary increase in saving may reduce overall spending and slow down economic activity, it is only through consistent and significant saving that businesses can be fueled with enough investment to contribute to the continuous growth of output over time. In other words, maintaining a high level of saving is essential for sustained economic growth as it enables businesses to invest in productive assets and expand their operations effectively.

Topics