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Question
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Solution
The saving function is primarily derived from the consumption function as the amount of saving is equal to the difference between the income and consumption expenditure.
Following are a few determinants:
i. Motive of precaution: People save money for the future in order to meet unexpected expenditure. This effects the savings level.
ii. Motive of foresightedness: People cut down their spending in order to meet future requirements for money. For examples, requirements for higher education, marriage, buying a house etc. This increases their savings level.
iii. Motive of enterprise: People prevent current consumption and save for the purpose of investing. Under this motive, people save to invest in a profitable enterprise.
iv. Motive of calculation: Under this motive, people save to invest in shares and debentures in order to increase their income.
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