The government passes a new initiative to encourage savings in a country with a well-functioning banking system. Which input in the production function changes, and what is the effect on economic growth in the country?

Question

Quizplus · Accepted Answer

The initiative to encourage savings would increase the amount of capital available in the economy, leading to an increase in the capital stock. This increase in capital would have a positive effect on economic growth as it would increase the productivity of labor and overall output in the economy. The other choices are not applicable as the initiative does not directly enhance human capital, decrease the capital stock or result in technological advances.

The Government Passes a New Initiative to Encourage Savings in a Country