Unit 2: A shrinking economy and rising savings ratio

The BBC reports that the UK economy shrunk by 1.6% in the last 3 months of 2008. In addition, it appears that the recession is leading people to save more

http://news.bbc.co.uk/1/hi/business/7967597.stm

a) Define the savings ratio
b) With savings interest rates at close to zero, why would peeople be saving more?
c) Using an AD/AS diagram, explain the likely consequences on the UK economy of an increase in the savings ratio
d) Following on.......explain why in the long term an increase in the savings ratio might be desiarable but why in the short run it is not