Other things being constant, countries with higher rates of saving
A) will have smaller GDPs than countries with lower rates of saving.
B) will have higher rates of investment, but slower growth.
C) will have higher rates of investment and growth.
D) will be operating at less than full employment and potential output.

Question

Quizplus · Accepted Answer

Countries with higher rates of saving typically have more funds available for investment, which can lead to higher rates of investment and ultimately higher growth rates. This is because investment in physical capital, such as factories and machinery, can increase productivity and output in the long run. Therefore, option C is the correct choice. Options A, B and D are incorrect because higher rates of saving are generally associated with higher GDPs, higher rates of investment and growth, and closer to full employment and potential output, respectively.

Other Things Being Constant, Countries with Higher Rates of Saving