Briefly Explain What Effect an Increase in the Saving Rate

question 19

Essay

Briefly explain what effect an increase in the saving rate will have on growth.

---

Definitions:

Saving

The act of setting aside a portion of current income for future use, or the portion of income not spent on current expenditures.

MPC (Marginal Propensity to Consume)

The proportion of additional income that is spent on consumption.

Saving

The act of setting aside money for future use instead of spending it immediately.

Disposable Income

The capital households have to spend and save once income taxes have been cleared.