The Saving Schedule Shown in the Diagram Would Shift Downward

question 106

Multiple Choice

The saving schedule shown in the diagram would shift downward if, all else equal,

• A) the average propensity to save increased at each income level.
• B) the marginal propensity to save rose at each income level.
• C) consumer wealth rose rapidly because of a significant increase in stock market prices.
• D) the real interest rate rose.

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Definitions:

Defined Benefit Pension Plan

A retirement plan where employer commitments are based on a formula considering factors like salary history and duration of employment, with the company bearing investment risk.

Prior Service Cost Amortization

The process of expensing the costs of retroactive benefits granted in a pension plan over a period of time.

Actuarially Determined Discount Rate

This refers to the interest rate used in the actuarial valuation to discount future pension obligations to present value, reflecting the expected rate at which the pension plan's liabilities can be funded or settled.

Pension Liability

The amount of money a company is required to pay into its employees' retirement plans in the future.