low savings

Question 1

There are two main reasons for low savings:

Answer 1

1. Low incomes - many people in developing countries don’t earn enough to have money left to save


2. Low access to banks, which are often far away and not always seen as secure

Question 2

A savings gap is when there is a gap between the amount of money held at ___, in the form of savings, and the amount of money that firms want to ___ from banks.

Answer 2

Bank
Borrow

Question 3

Which of the following best describes a savings gap?

Answer 3

A savings gap is when there is a gap between the amount of money held at banks, in the form of savings, and the amount of money that firms want to borrow from banks.

Question 4

How do low levels of investment affect aggregate supply and demand?

Answer 4

Keep aggregate demand and long run aggregate supply to the left

Question 5

Low profits mean that the government receives less money in tax . This means that they have less money to invest in .

Answer 5

Low profits mean that the government receives less money in corporation tax revenue . This means that they have less money to invest in development .

Question 6

Which of the following shows the impact of firms not being able to take out loans?

Answer 6

Low investment

Low economic growth

Low incomes

Question 7

What is the name of the cycle where a savings gap can lead to persistent low economic growth?

Answer 7

Harrod-Domar model

Question 8

If firms can’t take out loans they won’t be able to___. This will keep aggregate ___ and l____ -run aggregate supply _____. This will limit real ____ meaning incomes will stay ____and the savings ____ will persist.

Answer 8

Invest
Demand
Long
Inwards
GDP
Low
Gap

Question 9

As productivity increases, the ___ of producing one unit should ___. This means that Mandy can sell her products at lower )___ meaning she will be more competitive. She will sell ___ products and her income will increase.

Answer 9

Cost
Lower
Price
More

Question 10

What will happen if more money is saved in Bangladeshi banks?

Answer 10

An increase in savings in banks means that they have more money to lend out. This means that there will be a reduction in the size of the savings gap. In other words, there will be less of a gap between the amount of money the bank has deposited in savings and the amount that it needs to lend out.

Question 11

When people use microfinance loans to invest into their small businesses, their increases. This reduces their costs and means they can charge lower which makes them more meaning they will earn more in .

Answer 11

When people use microfinance loans to invest into their small businesses, their productivity increases. This reduces their costs and means they can charge lower prices which makes them more competitive meaning they will earn more in income .

Question 12

How does a reduction in the savings gap affect investment?

Answer 12

The savings gap will begin to decrease as the bank has more money available to lend out to firms wishing to invest. This in turn means that banks lend out more money which leads to an increase in investment.

Question 13

With no extra income, Mandy won’t be able to money in the bank. This means that there will still be a savings and that firms won’t be able to more money. As a result, will stay low. Since investment is a component of aggregate , this means that economic will stay limited.

Answer 13

With no extra income, Mandy won’t be able to save money in the bank. This means that there will still be a savings gap and that firms won’t be able to borrow more money. As a result, investment will stay low. Since investment is a component of aggregate demand , this means that economic growth or development will stay limited.

Question 14

How should microfinance loans affect small businesses?

Answer 14

As a firm invests it becomes more productive meaning production costs decrease. The firm can then lower the prices of its products and become more competitive. As a result, profits will increase and so will corporation tax revenues.

Question 15

Why might microfinance not lead to economic development?

Answer 15

Microfinance lenders may charge very high interest rates

Question 16

What might happen if people can’t afford to pay back loans?

Answer 16

If people can’t pay back their loans they may go bankrupt which means that they would have to sell off their business and become unemployed. As a result, they will have lower incomes and…

Question 17

Poor infrastructure makes firms less and this leads to an in costs. As a result, firms are forced to increase their which makes them competitive and their profits. This decreases tax revenue meaning the government has money to spend on development. As a result, development is

Answer 17

Poor infrastructure makes firms less productive and this leads to an increase in costs. As a result, firms are forced to increase their prices which makes them less competitive and decrease their profits. This decreases corporation tax revenue meaning the government has less money to spend on development. As a result, development is limit or constrain or constrained
Poor infrastructure makes firms less productive and this leads to an increase in costs. As a result, firms are forced to increase their prices which makes them less competitive and decreases their profits. This decreases corporation tax revenue meaning the government has less money to spend on development. As a result, development is constrained. 
Remember the same applies to poor education, infrastructure and health - development will be limited!