Question

Which of the following is NOT a reason individuals typically choose to save? 1. to smooth their consumption over the life cycle 2. to increase investment 3. to offset fluctuations in income as a way 4. to transfer income from good times to bad times

Answer 1

Answer:

2. to increase investment

Explanation:

Saving is putting aside money for future consumption rather than spending it now. Firms and households save for emergencies or to make future purchases. The money saved is usually held in a safe and easily accessible place, such as a bank account.

Investment is the buying of an asset with the expectation that its value will increase. The purpose of investing is to have the money increase. While saving is keeping the money aside safely with low-risk levels, investment has elements of financial risk. The objective of saving is safe custody for emergency or future consumption. Investments are risky; hence they cannot be a goal for savings.