Fretonia and Libstien Are the Same Except Fretonia Has a Larger

question 104

Multiple Choice

Fretonia and Libstien are the same except Fretonia has a larger capital stock.Both countries undertake policies that raise their saving rates to the same higher level.We would expect that

• A)both countries would have permanent increases in their growth rates,but the increase would initially be larger in Fretonia.
• B)both countries would have permanent increases in their growth rates,but the increase would initially be smaller in Fretonia.
• C)both countries would have temporary increases in their growth rates,but the increase would be larger in Fretonia.
• D)both countries would have temporary increases in their growth rates,but the increase would be smaller in Fretonia.

---

Definitions:

Effective Average

A measure that represents an average value weighted according to the relevance or importance of different components.

Lump-sum Amount

A fixed total amount that does not change with the level of output, activity, or number of beneficiaries.

Tax System

A framework of policies governing how taxes are collected from individuals and businesses by a governing authority.

Disproportionate

Significantly uneven or out of balance in comparison to something else.