What is precautionary saving? What might cause precautionary saving to increase or decrease if households have a desired level of wealth?

What will be an ideal response?


Precautionary saving is extra saving by households to protect themselves from unexpected decreases in future income due to job loss, illness, or disability. Precautionary saving will tend to increase if households believe the economy has started to perform poorly and the probability of a job loss has increased, if households have an unexpected decrease in wealth, and if households have increased uncertainty about future events. Precautionary saving will tend to decrease if households believe the economy is performing well and the probability of a job loss has decreased, if households have an unexpected increase in wealth, and if households have decreased uncertainty about future events.

Economics

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If a firm pays its workers $10 per hour, the marginal product of labor is 5 units per hour, and the price of the firm's product is $15 per unit, what is the price elasticity of demand facing the firm?

A) -1.15 B) -2.15 C) -1.0 D) -3.56

Economics

In recent decades, countries with high economic growth have experienced ________ inequality, and those with low rates of growth have experienced ________ inequality.

A. increasing; increasing B. increasing; decreasing C. decreasing; decreasing D. decreasing; increasing

Economics

When we are at full employment

A. the unemployment rate is 0. B. the cyclical unemployment rate is 0. C. the structural unemployment rate is 0. D. the frictional unemployment rate is 0.

Economics

If Canada has a comparative advantage over Mexico in the production of timber, then

A) the explicit cost of production for timber is lower in Canada than in Mexico. B) the opportunity cost of production for timber is lower in Canada than in Mexico. C) the implicit costs of production for timber are higher in Canada than in Mexico. D) the average cost of production for timber is lower in Canada than in Mexico.

Economics