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Outline three factors currently affecting the rate of savings in the Irish economy - Leaving Cert Economics - Question 7 - 2012
Question 7
Outline three factors currently affecting the rate of savings in the Irish economy. (i) (ii) (iii)
Worked Solution & Example Answer:Outline three factors currently affecting the rate of savings in the Irish economy - Leaving Cert Economics - Question 7 - 2012
Step 1
Confidence in economy
Answer
Currently, consumer confidence in the economy is low due to uncertainty about future economic conditions. This lack of confidence leads individuals to be more cautious with their spending, resulting in higher savings rates as they prefer to save rather than spending impulsively.
Step 2
Security of savings
Answer
With the ongoing economic climate, individuals are increasingly averse to risky investments. Many are opting for safer savings options, such as state-backed savings products. This increase in demand for secure savings solutions, like An Post's 'National Solidarity Bond', shows a trend towards prioritizing savings to protect financial security.
Step 3
Real Rate of interest
Answer
The real rate of interest plays a pivotal role in influencing saving behavior. Savers look for interest rates that exceed the current inflation rate to maintain their purchasing power. If financial products yield reasonable returns, it encourages individuals to save more as they feel their savings are growing effectively.