The conventional view of neoclassical economics is that economic growth depends on national saving. “Devoting larger amount of national output (income) on investment (saving) will increase the rate of economic growth and living standards of people”.

Task Description

Students are required to form groups with 2 to 3 members to write an essay on the question given below. The essay length should be 2,500 words ± 10%.

Essay question

The conventional view of neoclassical economics is that economic growth depends on national saving. “Devoting larger amount of national output (income) on investment (saving) will increase the rate of economic growth and living standards of people”. Do you agree with this claim? Evaluate critically.

Guidelines to complete the question

• · This question requires you to draw from materials covered in topics 2 to 4
• · Explain that higher investment is needed for sustained growth in the long run
• · Make appropriate use of the Solow growth model to discuss the theory. In the closed economy models covered in topics 3 and 4, increase in investment is only possible if there is a corresponding increase in saving.

Use diagrams appropriately.

2 · Discuss the trade-off between higher saving and lower consumption

• · Use data, graphs and/or tables to support your analysis as necessary
• · Use data from one or two countries to support your personal view/argument
• · Use information and data from reputable sources only. There are links to many economic and statistical agencies in the Internet Resources for Macroeconomics folder on the ECON7021 Blackboard page.
• · Descriptive statistics, graphs and tables, will be sufficient. You are not required to do econometric analysis