An increase in saving

Question

Quizplus · Accepted Answer

When there is an increase in saving, there is more money available for investment which can be directed towards the purchase of capital goods. This, in turn, increases the production capacity of the economy and leads to long-term economic growth. Therefore, option B is the best choice. Option A is incorrect because an increase in saving results in an increase in the amount of resources available for investment, not a decrease. Option C is incorrect because the reduction in consumption resulting from an increase in saving could lead to a decrease in real GDP in the short run, but in the long run, increased investment could lead to an increase in GDP. Option D is incorrect because an increase in saving does not necessarily increase a country's present standard of living; instead, it can lead to long-term benefits.

An Increase in Saving