Final answer:
Higher savings interest rates would likely motivate Diane to increase her savings during her working life, with the anticipation that the greater future value of these savings will support her in retirement when she has no income.
Step-by-step explanation:
When the savings interest rates increase, it would incentivize Diane to save more during her working life because her savings would accumulate more interest over time. Given that her income is greater than her needs during her working life, she would be likely to allocate a higher proportion of her income towards savings, as opposed to consumption, in anticipation of a future with no income. The effect of higher interest rates is to increase the future value of savings, which, according to the life-cycle hypothesis, suggests individuals will save more in the present to benefit from this increased future consumption.
Therefore, if Diane acts according to this economic behavior, she will likely increase her savings. This behavior aligns with the general tendency that when people anticipate higher returns to savings, they increase their current saving, as evidenced in the effects programs like Social Security have on savings habits.