Please explain in three well-structured paragraphs the impact of a change in the savings rate on the output

The answers is provided in paragraph along with brief introduction on savings. Each part has also been titled for better understanding.

Explanation:

Introduction

Saving is the income which has not been spent on any need or demand of a specific individual but instead kept in the bank account for future use or invested in some asset for earning future returns.

The impact of change in the savings rate on the output:

Investment

When an income is saved, it is sometimes deposited in the bank account. This in turn will lead to banks providing the save income to businesses for investing in their business. This will further grow the business and ultimately output would increase. The same goes for cases where savings are decreased that would lead the output to decrease as well.

Interest Rate

When savings are increased in banks. The amount to provide load has also been increased. This will lead to reduction in interest rates or borrowing rates which will help the economy to grow. Finally, the output will also grow.

Individual

If the saving rate is increased per person then the specific individual has more to spend. Such as if the average person spends the savings in shares or other businesses then the will increase their earnings even further. Thus, it would result in increase in output as well and vice versa.

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