In the long run, a higher savings rate leads to:
A)a higher level and growth of productivity and a lower level and growth of income
B)a lower level and growth of productivity and income
C)a higher level of productivity and income, but not higher permanent growth rates in productivity and income

Question

Quizplus · Accepted Answer

A higher savings rate leads to more investment, which in turn leads to higher productivity and income levels. However, it does not necessarily lead to higher permanent growth rates in productivity and income. This is because there are other factors, such as technological progress and human capital accumulation, that also contribute to long-term economic growth.

In the Long Run, a Higher Savings Rate Leads To