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Outline three factors currently affecting the rate of savings in the Irish economy - Leaving Cert Economics - Question 7 - 2010
Question 7
Outline three factors currently affecting the rate of savings in the Irish economy. (i) (ii) (iii)
Worked Solution & Example Answer:Outline three factors currently affecting the rate of savings in the Irish economy - Leaving Cert Economics - Question 7 - 2010
Step 1
Confidence in economy
Answer
Consumer confidence heavily influences the rate of savings. If individuals are uncertain about the economy's future, they may choose to postpone spending. This hesitation leads to increased savings as people defer purchases to secure their financial situations.
Step 2
Security of savings
Answer
In the current economic climate, individuals are often cautious about risky investments. Many people are thus inclined to opt for secure savings options, such as government-backed schemes. This behavior reflects a desire for stability, as consumers prioritize safety over high returns.
Step 3
(Real) Rate of interest
Answer
The interest rate on savings must exceed the current rate of inflation for savings to be practical. Savers are looking for financial products that offer reasonable interest rates. When these products align with their investment goals, individuals are more willing to commit their funds to savings.