Chapter Questions
Explain the relationship between saving and wealth, using the concepts of flows and stocks. Is saving the only means by which wealth can increase? Explain.
Give three basic motivations for saving. Illustrate each with an example. What other factors would psychologists cite as being possibly important for saving?
Define national saving, relating your definition to the general concept of saving. Why does the standard U.S. definition of national saving potentially understate the true amount of saving being done in the economy?
Household saving rates in the United States are very low. Is this fact a problem for the U.S. economy? Why or why not?
Why do increases in real interest rates reduce the quantity of saving demanded? (Hint: Who are the "demanders" of saving?
Name one factor that could increase the supply of saving and one that could increase the demand for saving. Show the effects of each on saving, investment, and the real interest rate.