Final answer:
When interest rates on savings accounts are high, consumers tend to save more in order to receive higher returns. This is because higher interest rates provide an incentive for individuals to save rather than spend their money.
Step-by-step explanation:
When interest rates on savings accounts are high, consumers tend to save more in order to receive higher returns. This is because higher interest rates provide an incentive for individuals to save rather than spend their money. When savings accounts offer higher returns, individuals are more likely to prioritize saving and delay their consumption in order to take advantage of the higher interest rates.
For example, if the interest rate on a savings account is 5%, an individual may choose to deposit their money in the account rather than spend it immediately. By doing so, they can earn interest on their savings and increase their overall wealth over time.
In contrast, when interest rates are low, the returns on savings accounts are also lower. This reduces the incentive for individuals to save their money and encourages them to spend it instead. In this case, individuals may prioritize present consumption over saving for the future.