Assume that a fiscal policy action results in a decrease in the saving rate. This decrease in the saving rate will cause a decrease in which of the following once the economy reaches its new steady state equilibrium?
A) The growth rate of output.
B) The growth rate of capital per worker.
C) The growth rate of capital.
D) All of the above.
E) None of the above.

Question

Quizplus · Accepted Answer

A decrease in the saving rate affects the level of capital and output in the long run, but it does not affect the growth rates of output, capital per worker, or total capital once the economy reaches its new steady state. Growth rates in the long run are determined by factors like technological progress and population growth, not by the saving rate.

Assume That a Fiscal Policy Action Results in a Decrease