Final answer:
High interest rates on savings accounts encourage people to save more money. Banks offer instruments like certificates of deposit (CDs) which usually have higher rates, but come with penalties for early withdrawal, promoting saving over time.
Step-by-step explanation:
High interest rates on savings accounts encourage people to save more money. This is primarily because higher interest rates provide greater returns on the funds they deposit, making it a more attractive option compared to lower-yielding alternatives. A similar option for depositing savings is a certificate of deposit (CD), which typically offers even higher interest rates in exchange for committing the money for a set period. CDs come with a caveat; withdrawing funds before the maturity date usually incurs a substantial penalty for early withdrawal. Therefore, high-interest rates act as an incentive for individuals to increase their savings to capitalize on the higher returns.