Interest provides an incentive for households to defer current consumption

Question

Quizplus · Accepted Answer

When households are offered interest on their savings, they have an incentive to defer current consumption and save the money instead. This is because the interest represents an opportunity to earn a return on their savings over time, which they can later use to increase their future consumption. Thus, interest rates can be an important tool for encouraging savings and helping households plan for the future.

Interest Provides an Incentive for Households to Defer Current Consumption