As an Economy Adjusts to an Increase in the Saving

question 28

Multiple Choice

As an economy adjusts to an increase in the saving rate,we would expect output per worker

• A)to increase at a constant rate and continue increasing at that rate in the steady state.
• B)to increase at a permanently higher rate.
• C)to decrease at a permanently higher rate.
• D)to return to its original level.
• E) none of the above

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Definitions:

Fixed Cost

Expenses that do not change with the volume of production or sales, such as rent, salaries, and insurance.

Variable Costs

Costs that move in parallel with the rate of goods or services output.

Sensitivity Analysis

The study of how the variation in the output of a model can be attributed to different variations in the inputs of the model, used to predict the impact of changes in economic variables.

Earnings Before Taxes

The income a company generates before taking into account the income tax expense.