Hey there! Sign in to join this conversationNew here? Join for free
    • Thread Starter
    Offline

    1
    ReputationRep:
    Hi,

    Im revising for my ECON2 (AQA) exam and was just wondering what the savings ratio is?

    It comes up a lot on the MCQs.

    Thanks
    Offline

    2
    ReputationRep:
    (Original post by bestfriends33)
    Hi,

    Im revising for my ECON2 (AQA) exam and was just wondering what the savings ratio is?

    It comes up a lot on the MCQs.

    Thanks
    The savings ratio is the % of disposable income that is saved instead of being spent. It affects AD in several ways. If the savings ratio is high then people consume less therefore AD will shift inwards. Also a high savings ratio can affect the amount banks lend, if there is higher savings, financial institutions will have more capital that they can lend to businesses to invest which will increase AD.
    If you could post some examples of the multiple choice questions I could try explain further but that should be most of what we need to know for unit 2
    If you need to see more check: http://tutor2u.net/economics/revisio...ld-saving.html it explains it way better than I can
    • Thread Starter
    Offline

    1
    ReputationRep:
    (Original post by Secret.)
    The savings ratio is the % of disposable income that is saved instead of being spent. It affects AD in several ways. If the savings ratio is high then people consume less therefore AD will shift inwards. Also a high savings ratio can affect the amount banks lend, if there is higher savings, financial institutions will have more capital that they can lend to businesses to invest which will increase AD.
    If you could post some examples of the multiple choice questions I could try explain further but that should be most of what we need to know for unit 2
    If you need to see more check: http://tutor2u.net/economics/revisio...ld-saving.html it explains it way better than I can
    Thank you.. it now makes sense So its mainly to do with how much people save.. an increase in the savings ratio means people save more (AD decreases) and a decrease in the savings ratio means people save less (AD increase)?
    This is one of the MCQs..
    All other things being equal, which one of the following is most likely to lead to an increase in imports? A fall in
    A the exchange rate
    B national income
    C government expenditure
    D the savings ratio

    The answer is D?
    Offline

    2
    ReputationRep:
    (Original post by bestfriends33)
    Thank you.. it now makes sense So its mainly to do with how much people save.. an increase in the savings ratio means people save more (AD decreases) and a decrease in the savings ratio means people save less (AD increase)?
    This is one of the MCQs..
    All other things being equal, which one of the following is most likely to lead to an increase in imports? A fall in
    A the exchange rate
    B national income
    C government expenditure
    D the savings ratio

    The answer is D?
    Yep your top looks right.

    The MCQ
    If you think about it, people will save less, so consume more and most of consumption in is on imports (shoes, coats etc.) so this will increase imports.
    Another way is to eliminate the others:
    • (for a) the if the exchange rate falls, the price of imports will increase so there will be less imports - you can rule this one out
    • (for b) if national income falls, less people will consume and so less imports - you can rule this one out
    • (for c) if government spending decreases, there will be decreased AD, so output will decrease and employment will decrease, disposable income will decrease and so spending, especially on imports, will decrease - you can rule this one out


    the quickest way is to read each one carefully and pick the one that you think looks/sounds right, but the safest way is to eliminate, normally eliminating takes a lot less time as you can just realise if national income falls less spending - so it's not that etc., I've just included more detail for your understanding. Hope this helps
 
 
 
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • Poll
    Would you like to hibernate through the winter months?
  • See more of what you like on The Student Room

    You can personalise what you see on TSR. Tell us a little about yourself to get started.

  • The Student Room, Get Revising and Marked by Teachers are trading names of The Student Room Group Ltd.

    Register Number: 04666380 (England and Wales), VAT No. 806 8067 22 Registered Office: International House, Queens Road, Brighton, BN1 3XE

    Quick reply
    Reputation gems: You get these gems as you gain rep from other members for making good contributions and giving helpful advice.