Suppose Mexico increases its saving rate. What will happen in the long run?
A) The growth rates of productivity and real GDP per person will increase.
B) Productivity and real GDP per person will increase.
C) The growth rate of productivity will increase, and real GDP per person will increase.
D) Productivity will increase, and the growth rate of real GDP per person will increase.

Question

Quizplus · Accepted Answer

Increasing the saving rate in Mexico would lead to more investment in capital goods, which enhances productivity and real GDP per person. However, it does not necessarily change the long-term growth rates of these variables, which are more influenced by technological progress and other factors.

Suppose Mexico Increases Its Saving Rate