The Supply of Saving 2. The supply of saving Suppose that Ana receives a pay rai

Question

The Supply of Saving

2. The supply of saving Suppose that Ana receives a pay raise of $1,050 per year. She can either use the extra money to consume goods and services, or she can save it by depositing it in a bank. For each of the annual interest rates in the following table, indicate how much Ana's saving will increase in one year if she devotes all of her raise to saving. (Note: Assume that no income taxes are deducted.) Increase in Saving (Dollars) Interest Rate (Percent) 6 20 A higher interest rate gives Ana incentive to save. The following graph shows a variety of possible curves representing the supply of saving.

Explanation / Answer

a 63

b 210

c higher incentive

d Graph B

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