Which of the following best describes the response of output as time passes to an increase in the saving rate?
A)The growth rate of output does not change.
B)The growth rate of output increases and gets even larger as time passes.
C)The growth rate of output increases and does not change as time passes.
D)The growth rate of output increases,but diminishes to its former level as time passes.

Question

Quizplus · Accepted Answer

An increase in the saving rate initially boosts the growth rate of output, but over time, the growth rate returns to its original level as the economy reaches a new steady state.

Which of the Following Best Describes the Response of Output