Figure 7-1. On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L).

-Refer to Figure 7-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?
A) In the long run, a higher saving rate leads to a higher level of productivity.
B) In the long run, a higher saving rate leads to a higher level of income.
C) In the long run, a higher saving rate leads to neither a higher growth rate of productivity nor a higher growth rate of income.
D) All of the above are correct.

Question

Figure 7-1. On the horizontal axis, K/L represents capital (K) per worker (L). On the vertical axis, Y/L represents output (Y) per worker (L).
 
-Refer to Figure 7-1. The shape of the curve is consistent with which of the following statements about the economy to which the curve applies?
A) In the long run, a higher saving rate leads to a higher level of productivity. 
B) In the long run, a higher saving rate leads to a higher level of income. 
C) In the long run, a higher saving rate leads to neither a higher growth rate of productivity nor a higher growth rate of income. 
D) All of the above are correct.

Quizplus · Accepted Answer

In the long run, a higher saving rate can lead to a higher level of productivity and income, but it does not affect the growth rates of productivity or income.