Other things the same, a country that increases its saving rate increases a. neither its future productivity nor future real GDP
. b. its future productivity and future real GDP. c. its future productivity, but not its future real GDP. d. its future real GDP, but not its future productivity.
Gross Domestic Product is the final value of the total amount of goods produced within a country's geographical boundary in a period of time. GDP can be calculated in 3ways using expenditure, production, or incomes.
The correct option is <em>"B," which is its future productivity and future real GDP.</em>
Explanation:
A country that increases its saving rate will definitely have sufficient funds to invest in revenue yielding programmes and projects. An increase rate of savings will translate to more money in the hands of firms and households which will boost investment opportunities that will enhance productivity and Real GDP. Since GDP is the aggregate production of goods and services of a country within a specified period of time ( usually one year), the increased rate of savings will improve the future real GDP because of increase in investment.
