Question
High propensity to consume is a virtue, while high propensity to save is not. Do you agree? Why or why not?
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Answer
The above statement is correct that high propensity to consume is a virtue as consumptions are considered as an injection to the circular flow of income by increasing demand, as increased demand leads to increased production of goods and services, leading to increase in induced investment and hence, National Income. On the other hand, savings are considered as leakages from the circular flow of income by reducing consumption demand and hence production, investment and National Income also fall.
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