Suppose the saving rate is initially greater than the golden rule saving rate. We know with certainty that a decrease in the saving rate will cause:
A) a decrease in consumption per worker.
B) a decrease in output per worker.
C) a decrease in the rate of growth in the long run.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

A decrease in the saving rate from above the golden rule level will lead to a decrease in output per worker, as less capital is accumulated. However, consumption per worker may increase as the economy moves towards the golden rule level, where consumption is maximized.

Suppose the Saving Rate Is Initially Greater Than the Golden