John P. Burkett
- Published in print:
- 2006
- Published Online:
- October 2011
- ISBN:
- 9780195189629
- eISBN:
- 9780199850778
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780195189629.003.0017
- Subject:
- Economics and Finance, Microeconomics
This chapter examines the factors that influence the saving behavior of an individual. It suggests that the decision to save rather than to spend a portion of income is in effect a decision to ...
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This chapter examines the factors that influence the saving behavior of an individual. It suggests that the decision to save rather than to spend a portion of income is in effect a decision to consume in the future rather than in the present and that this intertemporal choice can be analyzed using a budget constraint and indifference curves relating to present and future consumption. Evidence from the US indicates that an increase in real interest rates reduces borrowing and it has a small but positive net effect on aggregate household saving. This chapter also provides several relevant computational exercises and solutions.Less
This chapter examines the factors that influence the saving behavior of an individual. It suggests that the decision to save rather than to spend a portion of income is in effect a decision to consume in the future rather than in the present and that this intertemporal choice can be analyzed using a budget constraint and indifference curves relating to present and future consumption. Evidence from the US indicates that an increase in real interest rates reduces borrowing and it has a small but positive net effect on aggregate household saving. This chapter also provides several relevant computational exercises and solutions.
