Other things the same,if a country raises its saving rate,then in the long run
A)both the level and growth rate of real GDP are unchanged.
B)the level of real GDP is higher but the growth rate of real GDP is unchanged.
C)both the level and growth rate of real GDP are higher.
D)None of the above are correct.

Question

Quizplus · Accepted Answer

When a country raises its saving rate, it leads to an increase in investment, which in turn leads to an increase in the level of real GDP. However, in the long run, the growth rate of real GDP remains unchanged as the increase in the saving rate might lead to diminishing marginal returns to capital. Therefore, the best choice is B as it indicates that the level of real GDP is higher but the growth rate of real GDP is unchanged.

Other Things the Same,if a Country Raises Its Saving Rate,then