Other things the same,when an economy increases its saving rate
A)consumption and production rise now.
B)consumption rises now and production rises later
C)consumption falls now and production rises later.
D)consumption falls now and production falls later.

Question

Quizplus · Accepted Answer

When an economy increases its saving rate, it means that households and firms are decreasing their current consumption and instead saving more. This will lead to a decrease in current consumption expenditure and a shift of resources towards investment. In the short run, this shift may lead to a decrease in production or output, as less resources are being used for immediate consumption. However, in the long run, this shift towards investment can increase productivity and potential output, leading to higher levels of production later on. Therefore, the correct choice would be option C - consumption falls now and production rises later.

Other Things the Same,when an Economy Increases Its Saving Rate