Which of the following represents the effects in period t of an increase in the saving rate in period t?
A)no change in K / N
B)no change in Y / N
C)a reduction in C / N
D)all of the above

Question

Quizplus · Accepted Answer

An increase in the saving rate in period t leads to a reduction in consumption per capita (C/N) as more income is saved rather than consumed. Over time, this increased saving leads to an accumulation of capital per capita (K/N), which can increase output per capita (Y/N). However, in the immediate period t, the effects are primarily on consumption. The options suggest immediate effects, but the comprehensive understanding is that initially, there's a reduction in C/N, and changes in K/N and Y/N are more long-term effects. Thus, considering the immediate effect, the reduction in C/N is direct, making D the correct choice as it encompasses the immediate effect on consumption while acknowledging that there are no immediate changes in K/N and Y/N.

Which of the Following Represents the Effects in Period T