A Higher Saving Rate Leads to A

question 15

Multiple Choice

A higher saving rate leads to a:

• A) higher rate of economic growth in both the short run and the long run.
• B) higher rate of economic growth only in the long run.
• C) higher rate of economic growth in the short run but a decline in the long run.
• D) larger capital stock and a higher level of output in the long run.

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Definitions:

Full Employment GDP

The output level of goods and services in an economy when all available labor resources are being used in the most economically efficient way.

Equilibrium GDP

The gross domestic product level where aggregate supply equals aggregate demand, indicating a stable economy.

Inflationary Gap

A situation where aggregate demand in an economy exceeds aggregate supply, leading to inflation and a higher levels of spending than what is supported by production.

Federal Budget Deficit

The shortfall that occurs when the United States federal government's expenditures exceed its revenues within a fiscal year.