New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Principles of Microeconomics (GT

by: Judson Hoeger

Principles of Microeconomics (GT ECON 202

Marketplace > Colorado State University > Economcs > ECON 202 > Principles of Microeconomics GT
Judson Hoeger
GPA 3.96

Aaron Anderson

Almost Ready


These notes were just uploaded, and will be ready to view shortly.

Purchase these notes here, or revisit this page.

Either way, we'll remind you when they're ready :)

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Aaron Anderson
Class Notes
25 ?




Popular in Course

Popular in Economcs

This 1 page Class Notes was uploaded by Judson Hoeger on Tuesday September 22, 2015. The Class Notes belongs to ECON 202 at Colorado State University taught by Aaron Anderson in Fall. Since its upload, it has received 7 views. For similar materials see /class/210323/econ-202-colorado-state-university in Economcs at Colorado State University.


Reviews for Principles of Microeconomics (GT


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 09/22/15
Why do us households save so little We began this chapter by looking at household saving and we observed that the rate of household saving has been falling for the past 20 years See Figure 81 Now we are in a position to answer the question at the heart of this graph Why do US households save so little Economists do not agree on the reasons for low household saving in the United States although many hypotheses have been suggested One possible reason for low saving is the availability of generous government assistance to the elderly From a lifecycle perspective an important motivation for saving is to provide for retirement In general the US government provides a less comprehensive social safety net than other industrialized countries that is it of fers relatively fewer programs to assist people in need To the extent that the US government does provide income support however it is heavily concentrated on the older segment of the population Together the Social Security and Medicare programs both of which are designed primarily to assist retired people constitute a major share of the federal government s expenditures These programs have been very successful indeed they have virtually wiped out poverty among the elderly To the extent that Americans believe that the government will ensure them an ade quate living standard in retirement however their incentive to save for the future is reduced Another important lifecycle objective is buying a home We have seen that the japanese must save a great deal to purchase a home because of high house prices and down payment requirements The same is true in many other countries But in the United States with its highly developed financial system people can buy homes with down payments of 10 percent or less of the purchase price The ready avail ability of mortgages with low or even no down payments reduces the need to save for the purchase of a home What about precautionary saving Unlike Japan and Europe which had to re build after World War II the United States has not known sustained economic hardship since the Great Depression of the 19305 which fewer and fewer Americans are alive to remember Perhaps the nation s prosperous past has led Americans to be more confident about the future and hence less inclined to save for economic emergencies than other people even though the United States does not of fer the level of employment security found in Japan or in Europe US household saving is not only low by international standards it has been declining The good performance of the stock market in the 1990s along with in creases in the prices of family homes probably help to explain this savings decline As long as Americans enjoy capital gains they see their wealth increase almost without effort and their incentive to save is reduced Psychological factors also may explain Americans saving behavior For exam ple unlike in most countries US homeowners can easily borrow against their home equity This ability made possible by the highly developed US financial mar kets may exacerbate self control problems by increasing the temptation to spend Finally demonstration effects may have depressed saving in recent decades Chap ter 6 discussed the phenomenon of increasing wage inequality which has improved the relative position of more skilled and educated workers Increased spending by households at the top of the earnings scale on houses cars and other consumption goods may have led those just below them to spend more as well and so on Mid dleclass families that were once content with medium priced cars may now feel they need Volvos and BMWs to keep up with community standards To the extent that demonstration effects lead families to spend beyond their means they reduce their saving rate I RECAP T WHY DO PEOPLE SAVE Motivations for saving include saving to meet longterm objectives such as re tirement lifecycle saving saving for emergencies precautionaqr saving and saving to leave an inheritance or bequest bequest saving The amount that people save also depends on macroeconomic factors such as the real interest rate A higher real interest rate stimulates saving by increasing the reward for saving but it also can depress saving by making it easier for savers to reach a specific savings target On net a higher real interest rate appears to lead to modest increases in saving Psychological factors also may affect saving rates If people have self control problems then financial arrangements such as automatic payroll de ductions that make it more difficult to spend will increase their saving People s saving decisions also may be influenced by demonstration effects as when people feel compelled to spend at the same rate as their neighbors even though they may not be able to afford to do so


Buy Material

Are you sure you want to buy this material for

25 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Anthony Lee UC Santa Barbara

"I bought an awesome study guide, which helped me get an A in my Math 34B class this quarter!"

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.