Suppose the savings rates by income quartiles in Indonesia are given by the foll

Question

Suppose the savings rates by income quartiles in Indonesia are given by the following:
1st quartile - 5% savings rate
2nd quartile- 7% savings rate
3rd quartile- 10% savings rate
4th quartile - 20% savings rate

A). Illustrate the above relationship between income and savings rate using a graph with
income on the x-axis and total savings on the y-axis.


B). Will a government policy to redistribute income to achieve less income inequality
potentially help or hurt growth in this case? Illustrate your answer graphically.

Explanation / Answer

A) graph can easily be plotted using excel or other software. B) Here the policy would hurt the growth.

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