Higher interest rates boost saving incentives

Steps:

• Identify factors affecting saving: taxes, returns on savings, and economic conditions.
• Evaluate each option's impact on disposable income or saving returns.
• Higher returns make saving more attractive than spending.
• Select the option that directly increases saving rewards.

Why D is correct:

• Higher interest rates raise the return on savings (per the interest rate formula: Interest = Principal × Rate × Time), incentivizing people to save more.

Why the others are wrong:

• A: A rising exchange rate strengthens currency, making imports cheaper but not directly affecting saving incentives.
• B: Higher GST reduces purchasing power for consumption, potentially discouraging saving by squeezing budgets.
• C: Higher income tax lowers disposable income, leaving less to save after taxes.

Final answer: D