In the long-run,increased national saving must
I: increase total labour income in a closed economy.
II: increase total labour income in a small open economy.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.

Question

In the long-run,increased national saving must 
I: increase total labour income in a closed economy.
II: increase total labour income in a small open economy.
A) I is true; II is not.
B) II is true; I is not.
C) Both I and II are true.
D) Neither I nor II is true.

Quizplus · Accepted Answer

In the long run, increased national saving will increase the capital stock, which will increase the marginal product of labor and thus increase total labor income. This is true in both closed and small open economies.

In the Long-Run,increased National Saving Must