McqMate
| Q. |
Savings rate is relatively low in developed economies because of - |
| A. | Low per capita income |
| B. | Welfare programmes |
| C. | Liquidity/ Borrowing constraint |
| D. | High interest rate |
| Answer» B. Welfare programmes | |
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Explanation: As a general rule, saving is considered as a derivative of consumption. Developed economies have lower saving rates than developing countries because at the same income level, the level of consumption is higher in their cases. Besides, as seen in the recent case of the United States, welfare programmes have been found to be responsible for falling saving rate. Redistributing from young and future generations to older generations raises national consumption and lowers national saving (The Concise Encyclopedia of Economics). |
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