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The role of a bank is to move funds from savers to spenders. What happens when...

The role of a bank is to move funds from savers to spenders. What happens when savings rates are too high? An example would be people saving so much money that the banks cannot keep up? Would you agree that the United States is in that situation now? What could the Federal Reserve do to help solve that problem?

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Answer #1

No, the United States is not in a situation where people are saving too much money. This is the nature of people in the United States as people in the United States save less and spend a lot of money. The savings rate in the United States is very less as compared to other developed and developing nations of the world.

If this situation happens, then Fed can reduce the savings rate or rate of interest in the economy by increasing the level of money supplied in the economy which increases the rate of interest in the economy.

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