spring - anatomy of thrift summary midterm 2

spring - anatomy of thrift summary midterm 2 - Jodi...

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Jodi Krakower Ec 10 – Reading Summary The Great Thrift Shift – Anatomy of Thrift What Causes People to Save and Invest? - most influential theory of household saving is the “life-cycle” hypothesis o suggests that people try to smooth consumption over a lifetime o save little when they’re young more in middle years during steady income period draw from savings during retirement - people save for precautionary reasons o will save more if income is variable - people save b/c they want to leave assets to their children - people save in response to gov’t actions o people will save more if gov’t saves less b/c they expect higher taxes later on General Factors Causing People to Save - Demographics Saving rates rise when the ratio of children in the population fall - Economic Growth Saving rates rise when economies grow - Terms of Trade Shock If a country’s exports go up in price, saving rates go up - Financial Development
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