Question

If a country's saving rate increases, then in the long run\

a. both productivity growth and income growth increase.

b. only productivity growth increases.

c. only income growth increases.

d. neither productivity growth nor income growth increase.

Answer 1

a. both productivity growth and income growth increase.

Explanation:

In terms of economics, savings and investment has a direct relationship. The level of savings and investment go hand in hand. There exists a cycle running between the two of them. The amount saved from the savings are then invested in the investment. Low savings indicate that the economy has selected for the short term consumption. For long-term investment, more savings are intended that helps to be the backbone of the economy.