The saving function shows the relationship between planned real saving and
A) real wealth.
B) real disposable income.
C) the average propensity to save.
D) the marginal propensity to save.

Question

Quizplus · Accepted Answer

The saving function shows the relationship between planned real saving and real disposable income. Real disposable income is the income that households have available to spend or save after taxes and transfer payments are taken into account, and is therefore the most relevant variable for determining saving behavior. Real wealth, average propensity to save, and marginal propensity to save can all influence saving behavior, but they are not the primary determinant of planned real saving as shown in the saving function.

The Saving Function Shows the Relationship Between Planned Real Saving