Question

Suppose americans decide to save more of their incomes. if banks lend this extra saving to businesses, which use the funds to build new factories, this leads to growth in productivity because workers will have equipment with which to work.

Answer 1

It will not lead to productivity, because the productivity of higher increase is benefited by people who participated actively for example factory workers.

Step-by-step explanation:

From the question given, It is false because if bank lend extra saving to businesses, which use the funds to build new factories, it will not lead to growth in productivity because, the benefits from higher productivity is received by every participants in the society, i.e., factory owners, in terms of increased profit, workers in terms of increased income (normally equal to value of marginal product).

Answer 2

Banks provide loans from people's savings  to business firms which is used to expand the production by establishing new factories. This results to faster productivity growth since an increase in production capacities causes a corresponding increase in per capita production. Increased productivity is enjoyed by workers, entrepreneurs and all households. Therefore, the society does not get a free handout because when people are saving money there is a trade off which is an economic advantage to the society. Saving for the future by people in a a given community or society helps the economy and improves productivity.