Revision: Household Saving

This revision focus looks at household saving - the decision to postpone consumption

At AS level, changes in the household savings ratio can have significant effects on the level of aggregate demand (in the short term) and also on the funds available to finance investment. There has been a trend decline in the savings ratio in many countries (in the United States, the personal sector savings ratio has touched zero!) and AS economists ought to be able to use an aggregate demand / supply framework to analyse some of the effects for variables such as GDP, employment, inflationary pressures and the balance of payments.

Is the low level of household saving a cause for economic concern in the longer term? if so, what might be done to increase saving? How does globalisation impact on the significance of saving for economic growth? This 3 page revision focus document (available in pdf format) covers some of these issues.

Saving_Revision.pdf