Suppose There Is an Increase in the Saving Rate

question 15

Essay

Suppose there is an increase in the saving rate.Explain what effect this increase in the saving rate will have on the rate of growth of output per worker.

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Definitions:

Variable Cost

Costs that change in proportion to the level of activity or volume of production in a company.

Absorption Costing

The reporting of the costs of manufactured products, normally direct materials, direct labor, and factory overhead, as product costs.

Operating Leverage

Operating leverage describes the extent to which a company can increase its profits by increasing sales, highlighting the fixed versus variable costs structure.

Operating Income

A metric that calculates the profits realized from a business's core operations, excluding deductions of interest and taxes.