Suppose there is a reduction in the saving rate.This decrease in the saving rate will cause a reduction in which of the following once the economy reaches its new steady state equilibrium?
A)growth rate of output
B)growth rate of capital
C)growth rate of capital per worker
D)all of the above
E) none of the above

Question

Quizplus · Accepted Answer

A reduction in the saving rate affects the level of capital and output in the long run, but not the growth rates. Once an economy reaches its new steady state, the growth rates of output, capital, and capital per worker are determined by factors like technological progress and population growth, not by the saving rate.

Suppose There Is a Reduction in the Saving Rate