Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 12 - Production and Growth - Questions For Review - Page 257: 5

Answer

Higher rate of savings leads to higher growth rate temporarily. In the short run, these savings will cause the growth in capital stock initially at a high rate over time this diminishes and then it returns to the initial stage but this may take a long time.

Work Step by Step

This question asks you to identify how savings are affected over time. While it provides benefits in the short run it may not last in the long run with diminishing returns.
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