Question

Other things the same, a country that increases its savings rate will have:a. Higher future capital and higher future real GDP per person.b. Higher future capital but not higher future real GDP per person.c. Higher future real GDP per person but not higher future capital.d. Neither higher future capital nor higher future real GDP per person.

Answer 1

Answer: A) Higher future capital and higher future real GDP per person.

Step-by-step explanation:

New capital adds more to production in a country that doesn't have much capital than in a country that already has much capital. Hence why you would get a higher future capital and higher future real GDP per person when a country increases its savings rate since the investment of that savings rate will further increase.