Assume that a country experiences a permanent decrease in its saving rate. Which of the following will occur as a result of this decrease in the saving rate?
A) A permanently slower growth rate of output.
B) A permanently lower level of capital per worker.
C) No permanent effect on the level of output per capita.
D) Both A and B.
E) Both B and C.

Question

Quizplus · Accepted Answer

A permanent decrease in the saving rate leads to a permanently lower level of capital per worker, as less saving means less investment in capital goods. This does not necessarily mean a permanently slower growth rate of output, as growth can be influenced by factors other than capital accumulation, such as technological progress.

Assume That a Country Experiences a Permanent Decrease in Its