If the savings rate increases and the capital stock depreciation rate increases, output per worker will _________
A) increase if the effect of the savings rate increase is less than the effect of the capital stock depreciation rate increase.
B) decrease.
C) increase.
D) increase if the effect of the savings rate increase is greater than the effect of the capital stock depreciation rate increase.

Question

Quizplus · Accepted Answer

An increase in the savings rate typically leads to more investment in capital, which can boost output per worker. However, an increase in the capital stock depreciation rate works against this by reducing the effective amount of capital. If the positive effect of the higher savings rate on output per worker outweighs the negative effect of the increased depreciation rate, then overall, output per worker will increase.

If the Savings Rate Increases and the Capital Stock Depreciation