A decrease in s (the saving-investment rate) _________ the steady-state capital-output ratio and________ the output per worker in the long-run.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases

Question

Quizplus · Accepted Answer

A decrease in the saving-investment rate decreases the steady-state capital-output ratio because there is less investment to create capital. This in turn decreases output per worker in the long run because there is less capital to work with.

A Decrease in S (The Saving-Investment Rate) _________ the Steady-State