Household Saving Flashcards
What is saving
Disposable income that is not spend
What is disposable income
Income after taxes and benefits
What are some motivations for saving
Holiday
College fees
What is real interest rate
Nominal interest rate adjusted for inflation, a positive interest rate incentivises saving
What factors affect how much of their income people save
- price expectations
- availability of credit
- unemployment / job security
- consumer confidence
- expectations
- taxation of savings
- trust in savings institutions
- need to pay back debt
About how many houses in the U.K. have no savings at all
About one fifth
How do some people and businesses decide how much to save
- corporate savings provide a cushion during a recession
- savings provide a source of household wealth and a buffer against uncertain times
What is the paradox of thrift
Keynesian economics
Savings is positive and provides the funds to finance capital but if too many people save it causes a drop in AD and an even deeper recession
What is the savings ratio
The % of household disposable income that is saved rather than spent
What happened to the savings ratio during the recession in the U.K.
It claimed but has been falling since then back towards 6%
