Suppose an economy experiences an increase in its saving rate.The higher saving rate leads to a higher growth rate of productivity
A)in the short run,but not in the long run.
B)in the long run,but not in the short run.
C)in both the short run and the long run.
D)in neither the short run nor the long run.

Question

Quizplus · Accepted Answer

An increase in the saving rate can lead to higher investment and capital accumulation, boosting productivity growth in the short run. However, in the long run, the economy reaches a new steady state where the growth rate of productivity is determined by factors like technological progress, not the saving rate.

Suppose an Economy Experiences an Increase in Its Saving Rate