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

Question

Quizplus · Accepted Answer

A reduction in the saving rate from above the golden rule level will lead to a decrease in capital accumulation, reducing output per worker. However, it can increase consumption per worker if the initial saving rate was above the golden rule level.

Suppose the Saving Rate Is Initially Greater Than the Golden