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Income Method

According to ...

Question

According to the classical system, savings is a function of which of the following?

A

Income

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B

The interest rate

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C

The real wage

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D

The price level

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Solution

The correct option is B Income
Savings is a function of income because the propensity of an individual to save, depends on his/her income. As the income increases, the propensity to save also increase. On the hand the individuals who are poor, will have lowest propensity to save as they can barely satisfy their basic needs.

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