The supply of savings function shows the relationship between saving and:

Question

Quizplus · Accepted Answer

The supply of savings function shows the relationship between saving and the interest rate. As the interest rate increases, the opportunity cost of consumption increases, which leads individuals and businesses to save more of their income to take advantage of the higher returns on savings. Conversely, as the interest rate decreases, the opportunity cost of consumption falls and people tend to save less. The other options (consumption, income, age) may have an impact on savings, but they are not specifically reflected in the supply of savings function.

The Supply of Savings Function Shows the Relationship Between Saving