by Frank Shostak via Mises
According to the National Income and Product Accounts (NIPA) the US personal savings rate stood at 13.6 percent in February 2021 against 8.3 percent in February 2020. Since consumption expenditure is considered as the driving force of the economy, obviously a strengthening in savings, which implies less spending, cannot be good for economic activity, so it is held. Conversely, a decline in savings, which is an increase in spending is considered as good news for economic activity.
The NIPA framework is based on the view that spending by one individual becomes part of the earnings of another individual. The spending of the purchaser is the income of the seller, or we can say that spending equals income.
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