Suppose that the U.S.undertakes a policy to increase its saving rate.This policy will likely
A)have no impact on the level of real GDP per person.
B)immediately and permanently decrease the level of real GDP per person.
C)immediately and permanently increase the level of real GDP person.
D)gradually raise the level of real GDP per person.

Question

Quizplus · Accepted Answer

Increasing the saving rate would result in increased investment, which in turn would increase the capital stock. This would lead to higher productivity and eventual increase in the level of real GDP per person. However, this process would not be immediate and would occur gradually over time. Therefore the best choice is D.

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