Question

1. What is the relationship between savings, capital formation, and consumption?

2. According to Malthus, how does economic growth and population relate to each other?

Note :- Please avoid Plagiarism

Answer 1

a.Saving refers to proportion of income people used to keep in their hands to meet unforeseen situations or to consume in future instead of spending at current time. Capital formation depends on saving. Capital formation is the addition to capital stocks such as equipment ,tools, transportation assets etc. Saving leads to capital formation.Capital formation increases investment in the economy. Consumption is use of good and services by household b.According to Malthus, population growth is positively related to level of income per capita.. Technological progress is slow and is matched by proportional increase in population. So output per capita is stable at constant level. In post Malthusian regime, the growth rates of technology and total output increases,, then increase in population growth absorbs the growth of total output , even also income per capita would rise slowly. But in modern growth regime, positive relationship between population growth and income per capita is reverses. Increase in population growth affects the income per capita and economic growth. As population increases, total output is not enough to absorb for existing population. It adversely affect the economic growth