Figure 16.5: Personal Savings Rate (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-Consider Figure 16.5. A likely explanation for the rise in savings rates beginning in 2007 is the continued strength in stock and housing markets.

Question

Figure 16.5: Personal Savings Rate  (Source: Federal Reserve Economic Data, St. Louis Federal Reserve)
-Consider Figure 16.5. A likely explanation for the rise in savings rates beginning in 2007 is the continued strength in stock and housing markets.

Quizplus · Accepted Answer

The correct explanation for the rise in savings rates beginning in 2007 is the global financial crisis and the subsequent economic recession. This led to increased uncertainty and a decrease in consumer spending, which in turn led to an increase in savings rates. The strength of the stock and housing markets would typically lead to a decrease in savings rates as consumers feel more confident about their financial situation.

Figure 165: Personal Savings Rate (Source: Federal Reserve Economic Data