Answer to Question #265504 in Macroeconomics for Vukani

Question

Discuss the savings and portfolio decisions and employ empirical evidence to

back and/or refute its claims.

Answer 1

Solution:

Savings and portfolio decisions are driven by uncertainty, which affects consumer choice between saving and portfolio allocation decisions. Individuals are normally faced with a lot of decisions due to uncertainty, such as employment security, changes in wealth, changes in preferences, changes in income levels, changes in interest rates, economic growth, and inflation.

All these influences an individual decision on how much to save and how much to invest in portfolios. The higher the uncertainty of these events, the more savings and investments an individual will make.