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

Question

Quizplus · Accepted Answer

A decrease in the saving rate will lead to a temporary decrease in the rate of growth of output per capita. This is because lower saving leads to lower investment, which in turn reduces the productivity of labour and capital, resulting in lower economic growth. However, this effect is only temporary, as the economy eventually adjusts to the new level of saving and investment, and the rate of growth of output per capita returns to its previous level. Therefore, while the decrease in the saving rate may have a short-term impact, it does not lead to a permanent change in the level of output per capita.

For This Question,assume That the Saving Rate Decreases