A decline in the saving rate causes the steady-state level of output:
A) and capital to rise.
B) to rise and capital to fall.
C) and capital to fall.
D) and capital to remain constant.
E) to rise and capital to remain constant.

Question

Quizplus · Accepted Answer

A decline in the saving rate leads to a decrease in the amount of resources available for investment in capital. This results in a lower steady-state level of both capital and output, as less capital accumulation slows down economic growth.

A Decline in the Saving Rate Causes the Steady-State Level