Answer
If Americans increase their savings, this leaves more money for banks to lend to businesses. When more money is lent to businesses for capital development, this generally results in increased productivity.
This increase in productivity benefits workers, businesses and households.
Society does not get a "free lunch."
Work Step by Step
• If banks lend to businesses, this facilitates the construction of new factories. Subsequently, the expansion of productive capabilities allows for increased productivity.
• Increased productivity benefits workers because it lowers costs, allowing companies to increase wages and benefits. It benefits businesses because it makes companies more profitable, more competitive, and more efficient. Household benefit because increased productivity typically leads to a decrease in the cost of goods, making them more affordable.
• Society does not get a "free lunch" because of the trade-offs associated with saving money. When it comes to the savers, these individuals are putting away money that they could use in the present on immediate expenses. Effectively, they are missing out on investment and consumption opportunities.
