An explanation for the low saving rate in the United States consistent with the demonstration effect includes:
A)relatively generous government assistance for the elderly and large down payments required for home purchases.
B)households spending beyond their means to keep up with community standards.
C)well-developed financial markets making it easy to borrow against home equity.
D)large and persistent capital gains.

Question

Quizplus · Accepted Answer

The demonstration effect suggests that individuals spend more to match the consumption patterns of their peers, leading to lower savings rates as they try to keep up with community standards.

An Explanation for the Low Saving Rate in the United