Recently, it was observed that people have started saving more rather than spending. This has impacted the demand for luxury goods and services. The decline in the demand led to unemployment in the related sectors. What can be a primary solution to reduce the unemployment levels in the country?

A. increase the interest rates

B. impose fine for savings

C. force industries to rehire employees

D. reduce the interest rates

E. import goods and services

Question

Business

Camryn Cummings

7 March, 12:07

Recently, it was observed that people have started saving more rather than spending. This has impacted the demand for luxury goods and services. The decline in the demand led to unemployment in the related sectors. What can be a primary solution to reduce the unemployment levels in the country?

A. increase the interest rates

B. impose fine for savings

C. force industries to rehire employees

D. reduce the interest rates

E. import goods and services

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Answers (1)

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Misael Lawson · Answer 1

(D) Reduce interest rates. Let people save their money. Raising interest rates would only increases the difficulty in saving money, forcing people to clutch their savings even tighter. In a system where people are able to store and save their money more efficiently, then the more money they can afford to spend. This may allow people to continue to purchase luxury goods, because they won't have to sacrifice necessities. With this hypothetical rise in demand, there may also be a rise in employment, which would eventually counteract the problem presented in this question.