Motives for spending, saving and borrowing

Which factor is likely to cause an increase in people's savings?

• An increase in tax rates

• An increase in the interest rates

• A reduction in economic uncertainty

• A reduction in real wages

Which group is likely to save the largest proportion of its income?

• Employed workers

• Retired people

• School students

• Unemployed workers

What will lead to an increase in spending?

• An increase in the rate of unemployment

• A reduction in the rate of unemployment

• A reduction in expenditure by firms on advertising

• An increase in the rate of income tax

In developed economies, as a person's real income rises, a lower proportion of that income is usually spent on .........

• food

• holidays

• leisure activities

• transport

Which is the most important factor that affects how much a family saves?

• The income of the family

• The level of taxation

• The rate of inflation

• The reliability of banks

In which way will an increase in income be most likely to affect the amount of saving and spending of an individual?

• Spending falls & Savings fall

• Spending falls & Savings rise

• Spending rise & Savings fall

• Spending rise & Savings rise

Why might a family increase the proportion of its income it spends on food?

• Some of the children start work

• The government increases the benefits it pays to the family

• The number of children in the family increases

• The second parent becomes employed

In 2008 - 2009, the central bank of a developed country reduced interest rates from 5% to 0.5% per year to stimulate the economy.

How would this policy have affected the amount saved and the cost of borrowing to individuals?

• Amount saved decrease & Cost of borrowing decrease

• Amount saved decrease & Cost of borrowing increase

• Amount saved increase & Cost of borrowing decrease

• Amount saved increase & Cost of borrowing increase

Why may a rise in the rate of interest cause some people to save less?

• They may be saving for a fixed 10 year term

• They may be saving out of habit

• They may be saving to leave as much money as possible for their children

• They may be saving to raise a particular sum of money

What is the most likely result of an increase in interest rates?

• A rise in investment

• A rise in borrowing

• A fall in consumer spending

• A fall in productivity