Write 10 pages with APA style on Macroeconomics (savings ratio). A change in any factor that has an impact on the consumption apart from the income is said to result in a shift in the consumption func

Write 10 pages with APA style on Macroeconomics (savings ratio). A change in any factor that has an impact on the consumption apart from the income is said to result in a shift in the consumption function and this would ultimately affect the saving potential of an individual. The factors affecting the consumption function are:

A cut in the interest rate will enhance the consumption at all levels of income and will lead to an upward shift in the consumption function. Lower interest rate act to reduce the cost of servicing any mortgage or other debt and thereby increases the effective disposable income in the hands of the homeowners. Contrastingly a period of higher interest rate is expected to curtail the consumer spending.

Any apprehension about rising unemployment levels resulting in worsening situations of income level might result in a reduced confidence level of the consumers and a fall in the spending at all levels of income. In contrast to this situation any expectations of improvement in the health of the economy would increase the confidence of the consumers and the resultant planned spending.

The changes in the spending behaviour of the consumers affected by the above factors will have a direct bearing on the saving potential of the individuals.