Figure 15-4 The Economy’s Supply of Saving
The Economy’s Supply of Saving
The economy’s supply of saving is shown in Figure 15-4 , which shows
a positive relationship between the interest rate and the quantity of
financial capital supplied by the economy’s households. An increase in
the interest rate leads households to increase their total desired saving.
This is a movement upward along the supply curve.
There is a positive relationship between the interest rate and the flow
of saving supplied by households. An increase in the interest rate
increases the opportunity cost of current spending and leads households
to increase their desired saving.
An increase in current income leads to an increase in households’ desired
saving at any given interest rate and thus causes the supply curve to shift to
the right. An increase in expected future income (holding current income