According to Mankiw, “Canadian families generally save a smaller fraction of their incomes than their counterparts in many other countries…” (180). In addition, in more recent years, the Canadian household saving rate has decreased drastically. It is important to note that there is a tradeoff for households when they decide to forego their current consumption in lieu of saving. Because of this, many commentators such as high officials of the Bank of Canada have attributed the high interest rates to Canadians’ spending habits. To validate this assertion, it is important to understand the economic model called the market for loanable funds, the government policies that can encourage the increase of the economy’s investment and saving, and finally
