An upward shift in the saving function
A) will cause GDP to rise.
B) will have the same effect on GDP as an upward movement along the saving function.
C) means that, at any given level of income, people want to save less.
D) will cause GDP to fall by an amount equal to the shift divided by the marginal propensity to save.
E) means that the marginal propensity to save must have fallen.

Question

Quizplus · Accepted Answer

An upward shift in the saving function indicates that at any given level of income, people want to save more, not less. This increased saving reduces consumption in the short run, leading to a decrease in aggregate demand and thus a potential fall in GDP. The magnitude of the GDP change is determined by the size of the shift and the marginal propensity to save, as it affects the multiplier effect on the economy.

An Upward Shift in the Saving Function