A mountain village has no bank branch. A local shopkeeper stores income in a locked box and pays suppliers with banknotes. The government is considering enc...
Question 1 Report
A mountain village has no bank branch. A local shopkeeper stores income in a locked box and pays suppliers with banknotes. The government is considering encouraging a mobile banking service.
(a) What is meant by saving? [1]
(b) Explain one benefit to the shopkeeper of keeping money in a bank account rather than in the box. [1]
Answer Details
(a) Saving is income that is not spent on current consumption. [1]
(b) Keeping money in a bank account is safer from theft or loss than storing it in a locked box. [1] Other acceptable benefits are that the money may earn interest or can be transferred electronically to suppliers.
A strong definition of saving refers to the decision not to spend income now; it does not mean simply holding cash.
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