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Average Propensity to Save

Average Propensity to Save (APS) is an economic metric that indicates the proportion of total income that households save rather than spend on consumption. It is calculated by dividing total savings by total income over a specific period. A higher APS suggests that households are saving more of their income, which can contribute to long-term economic stability and investment. Conversely, a lower APS indicates that households are saving less and spending more, which can boost economic activity in the short term but might lead to financial vulnerabilities in the future.

Example

If a household earns $50,000 and saves $15,000, the APS would be 0.3, or 30%. This means that 30% of the household’s income is being saved, while the remaining 70% is being spent on goods and services.

Key points

• Reflects the percentage of income saved by households.

• High APS suggests more saving, which can lead to greater financial security and investment potential.

• Important for understanding saving behavior and its implications for economic growth.

Quick Answers to Curious Questions

Higher APS can reduce short-term economic growth by lowering consumer spending, but it can contribute to long-term stability and investment.

APS provides insights into how much of their income households are saving, which can affect both current economic activity and future economic prospects.

APS is calculated by dividing total savings by total income, giving a ratio that shows the proportion of income saved.