the major factors which influence the level of savings are the level of: course hero

Why is corporate saving important?

T/F: Corporate saving for short-term working capital purposes is the most important reason for businesses accumulating financial assets.

When does a savings deficit occur?

T/F: A savings deficit occurs when investment in real assets exceeds current income.

What is voluntary savings?

T/F: Voluntary savings are savings accumulated on a regular schedule for a specified length of time by prior agreement.

What happens to GDP if imports exceed exports?

T/F: If the imports of goods and services exceed exports, GDP will be higher.

Did foreign capital play a significant role in the development of the United States?

T/F: Foreign capital did not play a significant role in the development of the United States.

What factors affect the amount of savings?

Factors affecting the amount of savings include: levels of income, economic expectations, cyclical. influences, and the life stage of the individual saver. b. Gross savings are the profits remaining after tax, and in the case of corporations, after the payment of cash. dividends to stockholders.

What happens when income levels decrease?

a. As levels of income decrease, an individual may dissave, that is, reduce further consumption expenditures

What did grandparents' philosophy of "save now, spend later" lead to?

grandparents' philosophy of "save now, spend later" led to increases in consumer debt levels.

Which Federal Reserve policy characterized by very low interest rates?

d. The Federal Reserve adopted an expansionary monetary policy characterized by very low interest rates.

What is voluntary savings?

c. Voluntary savings are financial assets set aside for use in the future.

How does rising income affect saving?

Rising income levels will lead to a rise in total saving levels. As households gain more disposable income and have the ability to save more. However, periods of economic growth can also create optimism and confidence amongst consumers and encourage a relatively higher percentage of consumption. When households expect rising incomes, then they are more likely to borrow to finance luxury goods and cut back on spending.

When did the saving ratio fall?

During the 1980s, the saving ratio fell during the “Lawson Boom” – but then rose during the 1990-92 recession.

Why is inflation bad?

Also high inflation can create uncertainty and confusion and discourage consumers from taking risks such as taking out a loan. Inflation can be the uncertainty which encourages greater saving – so long as there are worthwhile places to save the money.

How does inflation affect saving?

Inflation. Inflation can have an effect on saving. If there is high inflation – and if inflation is higher than interest rates, then this will discourage saving. Households may look to either spend money before it falls in value or buy assets which hold their value during inflation.

What happens if interest rates are 15%?

If interest rates are 15%, but inflation is 16%, then saving money in a bank gives a negative interest rate and there is less incentive to save. If interest rates are 3%, but inflation 0%, then there is a positive real interest rate of 3%. 2. Income levels/Economic growth. Rising income levels will lead to a rise in total saving levels.

How does rising house prices affect household wealth?

Wealth – Rising house prices increase household wealth and diminishes the need to save in other forms. Inflation – high inflation may discourage cash saving, but encourage the purchase of fixed assets. There are two ways of measuring saving levels. Total (gross) saving levels. Saving ratio – the percentage of income that is saved.

What is saving ratio?

Saving ratio – the percentage of income that is saved.

How does rising income affect saving?

Rising income levels will lead to a rise in total saving levels. As households gain more disposable income and have the ability to save more. However, periods of economic growth can also create optimism and confidence amongst consumers and encourage a relatively higher percentage of consumption. When households expect rising incomes, then they are more likely to borrow to finance luxury goods and cut back on spending.

How does inflation affect saving?

Inflation can have an effect on saving. If there is high inflation – and if inflation is higher than interest rates, then this will discourage saving. Households may look to either spend money before it falls in value or buy assets which hold their value during inflation.

What is household savings?

Household saving is defined as income that is not consumed. Savings can be kept in cash form, saved in a bank account or saved in long-term assets, such as government bonds.

Does saving rate vary between countries?

Saving rates can vary between countries. It can reflect attitudes to borrowing, saving and social expectations. For example, thrift and saving can be seen as highly desirable in Germany – where there is greater aversion to debt. The UK has a greater willingness to borrow and run down savings.