All else equal, a nation that has a high rate of _____ will have a high rate of _____ and therefore a high growth rate of _____ capital.

Question

Quizplus · Accepted Answer

When a nation has a high rate of savings, which is the portion of income not spent on current consumption, it can be channeled towards investment that leads to the formation of physical capital. Investment refers to the creation of new physical capital or the maintenance or replacement of existing capital. Therefore, a high rate of investment resulting from high savings will lead to a high growth rate of physical capital. This physical capital can be factories, machines, infrastructure, and other forms of capital used to produce goods and services. Physical capital is a key factor in economic growth and can result in increased productivity, higher incomes, and improved standards of living.

All Else Equal, a Nation That Has a High Rate