EFFECTS OF SAVING AND

INVESTMENT IN THE COUNTRY

SAVINGS is setting aside money you don’t spend now for
emergencies or for a future purchase. It’s money you
want to be able to access quickly, with little or no risk,
and with the least amount of taxes.

The levels of savings are influenced by the following

indicators:
1. Interest rates - A high-interest rate will inspire
households to save more.
2. Confidence- A low confidence can encourage
households to save.
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INVESTMENT
For Individuals is buying assets such as stocks, bonds, mutual funds
or real estate with the expectation that your investment will make
money for you.
The levels of investment are affected by the following
indicators:
• 1. Interest rates - A high-interest rate makes investment more
expensive (cost of borrowing goes up).
• 2. Confidence If the firms are confident, they are more willing to
invest.
• 3. Economic growth - An increase in the rate of economic growth
will encourage firms to invest to meet future demand
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3. INFLATION
A rise in tax (excise or VAT) can lead an
increase in prices. Therefore, it will cause cost-push
inflation. Cost-push inflation occurs when the
overall prices increase (inflation) due to the increase
in cost of wages and raw materials. The higher costs
of production would result in a decrease in aggregate
supply (the amount of total production). Since the
demand for goods hasn't changed, the price increases
from production are passed onto consumers creating
cost-push inflation.

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2. INDIRECT TAX
The impact of indirect tax is more of a microeconomic issue. A
higher tax on a good will cause the supply curve shifts in the left
resulting to a higher price and a less in demand.