Question

The marginal propensity to save in China is extremely high, in excess of 30%. find out why?  

Answer 1

Ans) China seems to be fit in the life cycle hypothesis model. according to life cycle hypothesis, consumers plan consumption and saving over their life cycle taking consideration their future income. And according to this hypothesis consumers take debt when they are young with the viewpoint that they will repay the debt in the future. they save during middle age in order to maintain their level of consumption when they retire or when they don't have any source of income. In times of high economic growth much of income is saved so marginal propensity to save increases