Question

In the long run, an increase in the saving rate Group of answer choices doesn’t change the level of productivity or income. raises the levels of both productivity and income. raises the level of productivity but not the level of income. raises the level of income but not the level of productivity.

Answer 1

Answer:

The correct answer is letter "B": raises the levels of both productivity and income.

Explanation:

The savings rate represents the percentage of money households and organizations keep instead of spending. This behavior is influenced by different social features each population has. In the long run, an increase in the savings rate increases consumption, which leads the demand to increase pushing companies to increase their productivity to meet demand levels.

Companies may need their employees to work overtime or hire more new talents which increase income in the economy. Then, both productivity and income raise on the savings rate raise.