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Which of the following is a factor that influences the power to save in an economy?
- a)Size of the government budget
- b)Distribution of national income
- c)Exchange rate fluctuations
- d)Availability of luxury goods
Correct answer is option 'B'. Can you explain this answer?
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Which of the following is a factor that influences the power to save i...
Understanding the Influence of Income Distribution on Savings
The power to save in an economy is significantly influenced by the distribution of national income. Here’s a detailed explanation of why this factor is crucial:
Income Distribution and Savings
- Wealth Concentration: When income is concentrated in the hands of a few, they tend to save more because their basic needs are already met. This leads to a lower overall savings rate in the economy as the majority may struggle to save due to insufficient income.
- Marginal Propensity to Save: Different income groups have varying propensities to save. Lower-income households often have a higher marginal propensity to consume, meaning they spend a larger portion of their income on immediate needs rather than saving.
Economic Stability
- Social Mobility: A more equitable distribution of income fosters social stability. When people feel financially secure, they are more likely to save, investing in future opportunities such as education and home ownership.
- Consumer Confidence: A balanced income distribution enhances consumer confidence, encouraging people to save for future investments rather than just surviving day-to-day.
Long-term Growth
- Investment in Human Capital: When income is distributed more evenly, individuals can invest in education and skills, leading to a more productive workforce and greater economic growth.
- Supporting Economic Cycles: A fair distribution of income helps stabilize economic cycles; when more people save, it can lead to increased investment and further economic expansion.
In summary, the distribution of national income plays a pivotal role in determining an economy's overall power to save, influencing not only individual behaviors but also broader economic growth and stability.
The power to save in an economy is significantly influenced by the distribution of national income. Here’s a detailed explanation of why this factor is crucial:
Income Distribution and Savings
- Wealth Concentration: When income is concentrated in the hands of a few, they tend to save more because their basic needs are already met. This leads to a lower overall savings rate in the economy as the majority may struggle to save due to insufficient income.
- Marginal Propensity to Save: Different income groups have varying propensities to save. Lower-income households often have a higher marginal propensity to consume, meaning they spend a larger portion of their income on immediate needs rather than saving.
Economic Stability
- Social Mobility: A more equitable distribution of income fosters social stability. When people feel financially secure, they are more likely to save, investing in future opportunities such as education and home ownership.
- Consumer Confidence: A balanced income distribution enhances consumer confidence, encouraging people to save for future investments rather than just surviving day-to-day.
Long-term Growth
- Investment in Human Capital: When income is distributed more evenly, individuals can invest in education and skills, leading to a more productive workforce and greater economic growth.
- Supporting Economic Cycles: A fair distribution of income helps stabilize economic cycles; when more people save, it can lead to increased investment and further economic expansion.
In summary, the distribution of national income plays a pivotal role in determining an economy's overall power to save, influencing not only individual behaviors but also broader economic growth and stability.
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Which of the following is a factor that influences the power to save i...
The power to save in an economy depends on factors like the average level of income and the distribution of national income. Higher levels of income and greater income equality tend to lead to higher levels of savings.
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Which of the following is a factor that influences the power to save in an economy?a)Size of the government budgetb)Distribution of national incomec)Exchange rate fluctuationsd)Availability of luxury goodsCorrect answer is option 'B'. Can you explain this answer?
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Which of the following is a factor that influences the power to save in an economy?a)Size of the government budgetb)Distribution of national incomec)Exchange rate fluctuationsd)Availability of luxury goodsCorrect answer is option 'B'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which of the following is a factor that influences the power to save in an economy?a)Size of the government budgetb)Distribution of national incomec)Exchange rate fluctuationsd)Availability of luxury goodsCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is a factor that influences the power to save in an economy?a)Size of the government budgetb)Distribution of national incomec)Exchange rate fluctuationsd)Availability of luxury goodsCorrect answer is option 'B'. Can you explain this answer?.
Which of the following is a factor that influences the power to save in an economy?a)Size of the government budgetb)Distribution of national incomec)Exchange rate fluctuationsd)Availability of luxury goodsCorrect answer is option 'B'. Can you explain this answer? for B Com 2024 is part of B Com preparation. The Question and answers have been prepared according to the B Com exam syllabus. Information about Which of the following is a factor that influences the power to save in an economy?a)Size of the government budgetb)Distribution of national incomec)Exchange rate fluctuationsd)Availability of luxury goodsCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for B Com 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Which of the following is a factor that influences the power to save in an economy?a)Size of the government budgetb)Distribution of national incomec)Exchange rate fluctuationsd)Availability of luxury goodsCorrect answer is option 'B'. Can you explain this answer?.
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