As an economy adjusts to an decrease in the saving rate,we would expect output per worker
A)to decrease at a constant rate and continue decreasing at that rate in the steady state.
B)to decrease at a permanently higher rate.
C)to increase at a permanently higher rate.
D)to return to its original level.
E) none of the above

Question

Quizplus · Accepted Answer

A decrease in the saving rate typically leads to a lower steady-state level of capital per worker, which results in a lower output per worker in the long run. However, output per worker does not decrease at a constant rate or permanently increase; it adjusts to a new steady state. Thus, none of the given options accurately describe the expected outcome.

As an Economy Adjusts to an Decrease in the Saving