For this question,assume that a country experiences a permanent increase in its saving rate.Which of the following will occur as a result of this increase in the saving rate?
A)a permanently faster growth rate of output
B)a permanently higher level of output per capita
C)a permanently higher level of capital per worker
D)all of the above
E) both B and C.

Question

Quizplus · Accepted Answer

An increase in the saving rate leads to an increase in investment which increases the capital per worker. This, in turn, leads to an increase in productivity and output per capita. However, this increase in productivity does not necessarily result in faster growth rate of output, as the population growth rate also needs to be considered. Therefore, option E, which implies a permanently higher level of output per capita and a permanently higher level of capital per worker, is the best choice.

For This Question,assume That a Country Experiences a Permanent Increase