An economy's upward-sloping supply curve of desired saving is usually plotted with ________ on the vertical axis.

Question

Quizplus · Accepted Answer

The market interest rate represents the return on saving and therefore is the appropriate variable to plot on the vertical axis of the supply curve of desired saving. As the interest rate rises, households and firms are willing to save more, leading to an increase in the quantity of saving supplied. Conversely, when the interest rate falls, the quantity of saving supplied decreases.

An Economy's Upward-Sloping Supply Curve of Desired Saving Is Usually