Page 30 - Should the government force people to save more?
What is the opportunity cost of saving?
The opportunity cost is the next best alternative to good or service. The opportunity cost of saving is spending because when people do not save, they tend to spend the money.
What evidence is there of market failure in the passage?
The passage says that people are not saving enough money to use during their retirement because they are under a mindset in which they think that the government will provide for them and take care of them during their retirement. When people become more and more reliant on the government, the government will be providing for the people and then the government can eventually not have enough money to provide for everyone resulting in market failure.
Explain one influence on saving referred to in the passage.
When a person has a greater disposable income, they will have the ability to save more to use during their retirement or when they will be in dire need of money. If someone has a lower income, they are likely to spend most of it on necessities resulting in not saving enough money for their retirement or when they are in dire need of money.
Why might the level of saving vary between countries?
The level of saving might differ between countries due to many factors involved. Firstly, in a country
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If the rate of interest for bank loans is high, the potential borrower would prefer not to take a loan because they would not want to pay a high interest. However, if the rate of interest was low, the potential borrower would take a loan from the bank because they would not have to pay that much interest. Another factor that could influence the demand for bank loans is the condition of the economy. When the economy is doing well, people would be likely to take a loan and spend more when their prospects for employment are