forced saving

(redirected from involuntary saving)

forced saving

or

involuntary saving

the enforced reduction of CONSUMPTION in an economy. This can be achieved directly by the government increasing TAXATION so that consumers’ DISPOSABLE INCOME is reduced or it may occur indirectly as a consequence of INFLATION, which increases the price of goods and services at a faster rate than consumers’ money incomes increase.

Governments may deliberately increase taxes so as to secure a higher level of forced SAVING in order to obtain additional resources for INVESTMENT in the public sector. A ‘forced saving’ policy is often attractive for a DEVELOPING COUNTRY the ECONOMIC DEVELOPMENT of which is being held back by a shortage of savings.