Within an economy, how would you describe an economic unit and is saving among economic units desirable? In providing an answer, explain why policymakers place such emphasis on increasing levels of saving, and the need to develop a savings culture in the Caribbean. Furthermore, what is the likely impact on an economy that has 98%-100% of its economic units as net savers?

An economic unit is one that participates in the economy either through saving, investment or consumption. Anyone or institution can be an economic unit- government, household, schools,...etc. An increase in the level of savings serves to protect the balance of payments and to raise resources to finance investment in an expanding economy. In the Caribbean where there is a need for progress/growth, funds/savings are vital to finance this development. Although saving is greatly encouraged, there is still a need for borrowing so to stimulate economic activity.
With an economy that has 98%-100% of its economic units as net savers, the circular flow of funds is disrupted and in fact this is not the most efficient manner to mobilize funds. Thus with little lending, the economy will not be able to realize its full productive capacity, there would be a reduction in the ability to shift consumption through time and of course there would be other matters such as the decline in employment, GDP,....etc.

Financial intermediaries, such as commercial or retail banks, insurance companies and mutual funds, are only interested in making a big profit, and there is no benefit to having them operating.” Do you agree or disagree with this comment? Provide arguments to substantiate your answer.

This statement is false as financial intermediaries accelerate economic growth by expanding the available pool of savings, lowering the risk of investment through diversification, and increasing the productivity of