The capital-output ratio will ________ if the saving rate increases and the rate of depreciation of the capital stock increases by the same percentage.
A) increase
B) decrease
C) stay the same
D) first increase and then decrease

Question

Quizplus · Accepted Answer

The capital-output ratio remains unchanged if both the saving rate and the rate of depreciation of the capital stock increase by the same percentage, as these changes offset each other's effects on the capital-output ratio.

The Capital-Output Ratio Will ________ If the Saving Rate Increases