[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

gests that the personal saving rate rose after the stock market crashed in 2001.
Finally, there is the effect of the new economy. Many who observed increases in productivity
as a result of new technologies concluded that the economy would grow
faster, leading to higher incomes in the future. The income effect of higher expected
future income works to increase current consumption, reducing saving today.
Aggregate Saving The sum of the saving of all individuals in society is aggregate
saving. At any time, some individuals are saving and others are spending their
savings (or, as economists say, dissaving). Aggregate saving is the two activities taken
together. The aggregate saving rate is aggregate saving divided by aggregate income.
Demographic factors—that is, factors relating to population—in particular the rate
of growth of the population, are important determinants of the aggregate saving rate.
Retirees typically dissave. That is, they withdraw money from savings accounts and
cash in stocks and bonds if they have any (to supplement their main income sources,
Social Security and interest on investments). There is considerable concern about
the low aggregate saving rate in the United States (discussed further below), which
is explained in part by our aging population. A slowly growing population, like that
of the United States, has a larger proportion of elderly and, on that account, a lower
aggregate saving rate than faster-growing populations with higher birthrates.
Forms of Savings To simplify our discussion, we have assumed that savings
earns a single rate of interest, r. In fact, there are many different ways in which individuals
can save, and these may offer different interest rates. For example, if you
12
10
8
PERCENT
6
4
2
0
–2
1960 1965 1970 1975 1980 1985 1990 1995 2000
FIGURE 9.3
U.S. PERSONAL SAVING RATE,
1980–2002
U.S. households saved far less of their disposable income throughout the 1990s and into
the first years of the twenty-first century than they had done in earlier decades.
SOURCE: Economic Report of the President (2005).
SUPPLY IN THE CAPITAL MARKET ∂ 199