The life-cycle model predicts that if the proportion of the population that is elderly increases over the next 20 years, then the national saving rate ______ over the next 20 years.
A) will increase
B) will remain unchanged
C) will decrease
D) may first increase and then decrease

Question

Quizplus · Accepted Answer

According to the life-cycle model, as the proportion of the population that is elderly increases, the national saving rate decreases because older individuals tend to dissave to finance their retirement. This means that the younger generations will have less savings to invest, which will lead to a lower national saving rate. Therefore, the best choice is (C) will decrease.

The Life-Cycle Model Predicts That If the Proportion of the Population