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Harlamova29_29 [7]
3 years ago
7

Other things the same, when an economy increases its saving rate, a. consumption and production rise now. b. consumption rises n

ow and production rises later c. consumption falls now and production rises later. d. consumption falls now and production falls later.
Business
1 answer:
Dvinal [7]3 years ago
8 0

Answer:

c. consumption falls now and production rises later

Explanation:

Income [Y] is the total factor income earned by factors of production productive services, for economic activity.

Income earned is either consumed or saved  .

Income [Y] = Consumption [C] + Saving [S]

  • So, increase in savings rate & savings - reduces the consumption.

Savings are done for contingencies, for expanding economic activities later - by investment. In a simple economy model,

Savings [S] = Investment.

  • So, savings increase investment & production capacity later.
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