All Else Being Equal,a Permanent Decrease in the Saving Rate

question 38

Multiple Choice

All else being equal,a permanent decrease in the saving rate in a steady-state economy would cause

• A)an increase in the capital-labor ratio and an increase in consumption per worker.
• B)an increase in the capital-labor ratio and a decrease in consumption per worker.
• C)a decrease in the capital-labor ratio and a decrease in consumption per worker.
• D)a decrease in the capital-labor ratio and an increase in consumption per worker.

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Definitions:

Consumer Income

The total earnings of a consumer from various sources before taxes, crucial in determining spending and saving behaviors.

Normal Good

A good for which demand increases as consumer income rises.

Inferior Good

A type of good for which demand decreases as the income of consumers increases, inversely related to income changes.

Law Of Demand

An economic principle stating that, all else being equal, an increase in the price of a good or service will lead to a decrease in the quantity demanded, and vice versa.