GDP - consumer confidence, saving rate

GDP growth is positively relative to saving rate and consumer confidnce.

But Consumer confidence and saving rate has negative relationship.

Question:

  1. If saving rate up… normally GDP growth will up or down?

  2. If the AM questions ask: The country is in recession phase, should government encourage people to spend or deposit the money? Which one should we choose?

up…

Savings is part of the increased capital stock in the cobb douglas.

But saving rate up normally consumer confidence is down. Consumer spending is the major part of GDP?

DOWN…

GDP includes investment.more saving less capital investment…

If the AM questions ask:

The country is in recession phase, should government encourage people to spend or deposit the money?

Which one should we choose?

Q5 of the 2013 am exam asks what would happen to the growth projection if the gov’n increased the max allowable contribution to tax-free retirement accounts. The answer states this would increase savings and investments and therefore the change in capital stock which would increase growth projection.

How is this different from what FrankCFA has asked?..