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Understanding relationships among the components of GDP: Work with FRED from 1947q1 to the most recent...

Understanding relationships among the components of GDP: Work with FRED from 1947q1 to the most recent observation available. Note the sample several series is truncated.

--> Produce a graph using the previous series that shows the savings rate over time. How does it behave over time? Can you provide an economic explanation?

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Answer #1

The saving rate has a trend of increase and decrease between 1945 and 1980. It reached highest in 1965. After t 1980's it is falling as comapred to original levels and continue to fall as compared to 1980's level.

The economic reason behind this , as output grows , savings as a part of output grows and thus saving rate . Also savings has to do a lot with temporary income , permanent income and ricardian equivalence. As the investment booms , economy is in boom phase overall saving increase and vice versa.

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