Savings Rates Across Income Groups

Steps:

• Recall that savings rate is income minus consumption divided by income.
• Understand that low-income households prioritize basic needs, consuming most income.
• Note high-income households meet needs and save/invest the surplus.
• Compare percentages: higher income leads to higher savings proportion.

Why D is correct:

• Economic theory shows the average propensity to save rises with income, as per Keynesian consumption function where consumption is a smaller share of income for richer groups.

Why the others are wrong:

• A: High-income groups borrow for investments like homes or businesses.
• B: High-income groups save more absolutely and proportionally than low-income ones.
• C: Low-income groups face higher borrowing barriers due to credit risks and lack of collateral.

Final answer: D