savings + AD

Question 1

what is saving

Answer 1

the disposable income which is not spent on consumption in the economy

Question 2

marginal propensity to save

Answer 2

the willingness of households to save additional income earns

Question 3

determinate of savings

Answer 3

-real disposable income: if they do not have a lot of disposable income, they will be unable to save
-interest rates: if the interest rates are high, there is a higher return on saving, encouraging it
-consumer confidence: if consumer confidence is low (recession etc.) then they are more likely to save
-trustworthiness of bank: in developing countries, banks are less likely to be trustworthy, therefore consumers are less likely to save