OBJECTIVESThe broad objective of this report is to analyze in consumption, savings and investment in Bangladesh. The reports objectives can be divided into the following:To give an overall study of consumption, savings and investmentTo find the exact amount of in consumption, savings and investment that has taken place in the past five years, analyze the data and break them down to why they took placeMETHODOLOGYThe research conducted in this report is of descriptive nature. Secondary data analysis was selected as the basic research method.
Data CollectionData for this report has been extracted from secondary sources, as the descriptive nature of the study to prepare this report calls for existing facts and information compilation.
Source of Secondary DataMajority of the secondary data was obtained from the internet and newspaper archives. Moreover, data was also collected from publications of organizations such as ADP, UNDP etc. Interviews with economists were also regarded as a source of information.
Data processing and analysisCollected information was processed with the aid of MS Excel and other Microsoft applications.
LIMITATIONSThe major limitation in this report was the absence of relevant articles or in-depth studies on the macroeconomic scenario of Bangladesh. The absence of information pertaining to the tax structure and such made a complete analysis impossible, while the current political deadlock had made it very hard to collect information from primary sources. Technical and environmental constraints hampered the course of the report as well. Due to time constraints, extensive research was not possible. The analysis and recommendations presented here may vary with opinions of experts in this field of study, owing to limited economics knowledge on part of the author of this report.
INTRODUCTIONConsumption, savings and investments are key parts in the macroeconomic scenario of a country. To understand the effects of these three functions, it is necessary to understand the three functions.
Consumption can be defined as the utilization of economic goods to satisfy consumer needs and demands or in manufacturing.
Savings can be defined as the sum of money left over after consumption and laid away for future use. According to Keynesian economics, the amount left over when the cost of a person's consumer expenditure is subtracted from the amount of disposable income that he or she earns in a given period of time. For those who are financially prudent, the money that is left over after personal expenses have been met can be positive. Those who tend to rely on credit and loans to make ends meet, usually end up having negative savings.
Investment is defined as the commitment, of money or capital, with the view of gaining a financial return. Savings can be turned into further income through investing.
THEORETICAL FRAMEWORKThere are two theories, which can be said to have a bearing on consumption, savings and investment. They are the Keynesian theory and the Austrian theory.
AUSTRIAN THEORY: The Austrian theory of the business cycle emerges straightforwardly from a simple comparison of a savings-induced boom, which is sustainable, with a credit-induced boom, which is not. An increase in saving by households and a credit expansion orchestrated by the central bank set into motion market processes whose initial allocation effects on the economy's capital structure are similar but whose ultimate consequences are sharply different.
The general thrust of the theory, though not the full argument, can be stated in terms of the conventional macroeconomic aggregates of saving and investment. The levels of investment are determined by the supply of and demand for loan able funds. Supply...