Consider two alternatives to prepare for retire - ment: (1) saving in a bank where your funds earn interest, and (2) buying fine art that rises 5 in value over time. Each grows your retirement account over time a. If the rates of return on fine art purchases fall, how would you expect the allocation of retirement funds to change across the macroeconomy? b. If the national savings rate is based only on the first option (saving in a bank), then what happens to the national savings rate when the allocation of retirement funds shifts as you describe in your response to part (a) ?

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Jan Gaines

Business

3 January, 05:31

Consider two alternatives to prepare for retire - ment: (1) saving in a bank where your funds earn interest, and (2) buying fine art that rises 5 in value over time. Each grows your retirement account over time a. If the rates of return on fine art purchases fall, how would you expect the allocation of retirement funds to change across the macroeconomy? b. If the national savings rate is based only on the first option (saving in a bank), then what happens to the national savings rate when the allocation of retirement funds shifts as you describe in your response to part (a) ?

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Caleb Ayala · Answer 1

a) as the rate of return on fine art falls, allocation will shift towards saving in bank as these two options are substitutes

b) as the allocation shifts towards saving in bank, national savings rate increases