Question

All else equal, an increase in savings will cause capital stock to:

Answer 1

If all else equal, an increase in savings will cause capital stock to increase. Capital stocks signifies the position of the economy's productivity. If there is more savings, there is the possibility of increase in accumulating capital because business owners can buy new equipment or add new workers. But sometimes, it does not necessarily mean that if there is higher savings, there is also higher investments and may not lead the people to invest more.