What are the long-run effects on productivity and income of an increase in the saving rate?
In the long run, a higher saving rate leads to higher levels of productivity and income per person but not to higher growth in these variables.
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Refer to the figure above. What is the quantity effect of a price reduction from $6 to $4?
A) $600 B) $800 C) $1,000 D) $1,200
Refer to Figure 13.2. Assume the economy is initially in equilibrium with real GDP equal to potential GDP
Other things equal, if the economy enters a recession and the government underestimates the severity of the recession when implementing fiscal policy, the output gap will ________ and the rate of inflation will ________ than if the government had correctly estimated the recession's severity. A) decrease less; decrease less B) decrease more; decrease more C) decrease more; decrease less D) not change; not change