GENERAL KNOWLEDGE

GK

BUSINESS ECONOMICS

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
What happens as a person’s or economy’s income rises?
A
They spend less
B
They spend proportionately more
C
They save proportionately more
D
They save proportionately less
Explanation: 

Detailed explanation-1: -Interest rates – higher interest rates make saving more attractive. Economic growth – high growth and high consumer confidence encourage relatively higher spending and a fall in the savings ratio. The age of individuals – People in their 40s and 50s tend to save for retirement. Old people run savings down.

Detailed explanation-2: -If income goes up then consumption will go up and savings will go up. Consider the graph below, which shows Consumption as a positive function of Income: Notice the use of the 45˚ degree line to illustrate the point at which income is equal to consumption.

There is 1 question to complete.