Question

Explain 'saving function' with the help of a schedule and diagram.

Answer 1

Savings function refers to the standard equation of savings which defines the relationship between savings and income where savings value can be derived at each level with the use of income value.

S= s + Y(1-b) where s=autonomous savings, (1-b)= marginal propensity to save, and Y= income.

For example, s= -50 and MPS= 0.5

Income (Y)	Savings = s+ (1-b) Y
0	-50
100	0
200	50