For this question,assume that the saving rate increases.We know that this increase in the saving rate will cause which of the following?
A)a temporary increase in the level of output per capita
B)no permanent change in the level of output per capita
C)a temporary increase in the rate of growth of output per capita
D)a permanently higher rate of growth of output per capita
E) none of the above

Question

Quizplus · Accepted Answer

An increase in saving rate can cause a temporary increase in the rate of growth of output per capita because with more savings, there will be more investment in capital which can lead to higher productivity and output. However, this effect may only be temporary if the increase in savings is not sustained or if there are diminishing returns to capital accumulation. Therefore, option C is the best answer. None of the other options suggest a temporary increase. Option A suggests a permanent increase, which is unlikely given the complexity of economic factors. Option B suggests no change, which is also unlikely. Option D suggests a permanent increase, which is possible but not guaranteed. Option E is too vague to consider as the answer.

For This Question,assume That the Saving Rate Increases