Overview of Average Propensity to Save
The term average propensity to save is an important economic concept that is related to savings. It is also known as savings ratio. It is a crucial term in the domain of economics and related fields.Description of Average Propensity to Save
The term average propensity to save is used to show the amount of money that is saved by an individual from his earnings.Average propensity to save is normally applied in the case of families.
This concept is normally conveyed in terms of a percentage of the disposable income of a particular family.
Variation in Average Propensity to Save
The savings ratio or average propensity to save has been different in case of various countries.It has also differed over the course of time.
Factors affecting Average Propensity to Save
There are several factors that have an impact on the average propensity to save of any family or household. Some of these are:- The ratio of aged people in a particular family
- The inflation rate in a country
- The tax system in place in a country where the particular household is based
The tax system of a country may have an adverse effect on the average propensity to save of a family. Often the inflation rate also impacts the average propensity to save or savings ratio. The main reason behind such a thought is that the increase in prices of various goods and services make people spend lesser than they would in normal circumstances. All this means that the amount of savings increase.
