If consumers decide to save a larger percentage of their income,it will be:
A) harmful in the long run because the price level will rise.
B) beneficial in the short run because saving will rise.
C) beneficial in the long run because interest rates will fall.
D) harmful in the long run because aggregate supply will fall.
E) harmful in the long run because unemployment will increase.

Question

Quizplus · Accepted Answer

When consumers save a larger percentage of their income, it will lead to an increase in the supply of loanable funds, which will drive down interest rates in the long run. This, in turn, will encourage more investment spending, which will lead to economic growth and an increase in the standard of living. Therefore, it will be beneficial in the long run because interest rates will fall.

If Consumers Decide to Save a Larger Percentage of Their