Question

Which one of the following will cause a movement up along an economy's saving schedule? multiple choice

a. an increase in stock prices
b. an increase in disposable income
c. an increase in household debt outstanding
d. an increase in interest rates

Answer 1

An increase in disposable income most directly causes a movement up along an economy's saving schedule, indicating higher saving at each income level.

Step-by-step explanation:

A movement up along an economy's saving schedule typically indicates that people are saving more at each level of income. This can be attributed to various factors; among the multiple-choice options provided:

• An increase in stock prices (a) might lead to a wealth effect where people feel richer and consequently might choose to save less, rather than more.
• An increase in disposable income (b) is the most likely to cause a movement up along the saving schedule because as households have more income available, they can save more.
• An increase in household debt outstanding (c) would likely discourage additional saving as households may focus on repaying debt.
• An increase in interest rates (d) could incentivize saving by offering higher returns, but this affects the incentive to save rather than movement along the existing savings schedule.

Therefore, an increase in disposable income would most directly cause a movement up along an economy's saving schedule, indicating higher saving at each income level.