Forced Saving refer to-a)Taxes on individual income and wealthb)Compulsory deposits imposed on income taxpayersc)Provident fund contribution of private-sector employeesd)Reduction of consumption consequent to a rise in pricesCorrect answer is option 'D'. Can you explain this answer?

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Forced Saving refer to-

a)
Taxes on individual income and wealth
b)
Compulsory deposits imposed on income taxpayers
c)
Provident fund contribution of private-sector employees
d)
Reduction of consumption consequent to a rise in prices

Correct answer is option 'D'. Can you explain this answer?

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Forced Saving refer to-a)Taxes on individual income and wealthb)Compu...

In economics, forced saving occurs when a person’s spending is less than their earnings due to consumer goods shortages, which can cause hyperinflation. Forced saving holds a major role in describing how expansionary monetary policy can cause artificial booms.

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Forced Saving refer to-a)Taxes on individual income and wealthb)Compu...

Forced saving refers to the reduction of consumption that occurs as a result of an increase in prices. When prices rise, individuals may be forced to save more and spend less in order to meet their basic needs and maintain their standard of living. This reduction in consumption is often involuntary, as individuals are compelled to save due to the higher cost of goods and services.

- **Definition of Forced Saving**:
Forced saving refers to the decrease in consumption that occurs when individuals are compelled to save more due to rising prices. It is a result of the reduced purchasing power of individuals as the cost of goods and services increases.

- **Explanation of Options**:
a) Taxes on individual income and wealth: Taxes are not directly related to forced saving. While taxes may reduce disposable income, they do not necessarily lead to an increase in savings.

b) Compulsory deposits imposed on income taxpayers: Compulsory deposits imposed on income taxpayers can be seen as a form of forced saving. However, this option specifically refers to income taxpayers, which is a subset of the population. Forced saving, on the other hand, encompasses a broader population affected by rising prices.

c) Provident fund contribution of private-sector employees: Provident fund contributions are a form of voluntary saving made by employees for their retirement. While it encourages saving, it is not directly related to forced saving resulting from price increases.

d) Reduction of consumption consequent to a rise in prices: This option correctly identifies forced saving as the reduction in consumption that occurs as a result of higher prices. When prices rise, individuals have to spend more on essential items, leaving them with less disposable income for discretionary spending. This reduction in consumption is an involuntary response to the increased cost of living.

- **Conclusion**:
Forced saving refers to the reduction in consumption that occurs when individuals are compelled to save more due to rising prices. It is a consequence of the decreased purchasing power resulting from higher costs. Among the given options, option D correctly identifies forced saving as the reduction of consumption consequent to a rise in prices.

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Forced Saving refer to-a)Taxes on individual income and wealthb)Compulsory deposits imposed on income taxpayersc)Provident fund contribution of private-sector employeesd)Reduction of consumption consequent to a rise in pricesCorrect answer is option 'D'. Can you explain this answer?

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