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

Question

Quizplus · Accepted Answer

When the saving rate is initially greater than the golden rule saving rate, an increase in the saving rate will lead to a decrease in consumption per worker because resources are being diverted from consumption to savings, potentially leading to over-investment and less immediate consumption per worker. Output per worker may not necessarily decrease, and the rate of growth in the long run is determined by technological progress and not by the saving rate, so choices B and C are incorrect.

Suppose the Saving Rate Is Initially Greater Than the Golden