Question

Assume that the saving rate of a country increases from 2% to 3%, then in the long runa. a.productivity and real GDP per person for that country both will increase.b.productivity and real GDP per person for that country both will decrease.c.neither productivity nor real GDP per person of that country will increase.d.real GDP per person will increase but productivity of that country will decrease.

Answer 1

d. Real GDP per person will increase but productivity of that country will decrease.

Step-by-step explanation:

There is a positive relationship between per capita gross domestic product and savings rate due to higher interest rates which can lead to lower consumption. The productivity of that country will decrease because there will be a lower indebtedness because there will be a higher marginal propensity to save.