Foregoing consumption Savings is defined as foregoing consumption

Foregoing consumption • Savings is defined as foregoing consumption and is required if investment is to occur. • Giving up on current access to goods and services in the now to gain benefits from investing in capital goods for the future. • Present consumption is the now and this can be high or low. • NZ has a habit of spending on the now and not saving for the future. Therefore less Investment and future capital goods are available to increase GDP and create jobs and therefore improve Wealth.

Short term impacts • Impacts from an event that will occur within the 2 -5 year term. • Foregoing consumption now in this time period can lead to greater growth in the long term e. g. 5 to 15 years etc. • Present consumption refers now within the short term 25 year term.

Long term impacts • In the long term all production resources can be increased and more production can be gained from new technology /methods available. • These gains can push out the PPC which benefits a country with greater access to production and goods / services for a better standard of living. • Investment benefits an economy by providing research and development to benefit future production. • Purchased capital goods will increase production so GDP will increase in the future.

Long term impacts

Compare and contrast question • CC the effect of more savings on short term and long-term growth using the PPC. – In detail explain the effect of foregoing current consumption on short-term growth. – In detail explain why foregoing current consumption may have a more positive impact on long term growth. – Draw a graph showing the short term impact and long term impact.