Answered: How come higher saving leads to more…

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter17: Economic Growth: Resources, Technology, Ideas And Institutions

Section: Chapter Questions

Problem 6QP

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How come higher saving leads to more rapid growth?

Expert Solution

Step 1

The higher savings means the resources and incomes of the nationals has been used in consumption at a lower rate and mainly used in savings which leads to investment in capital goods. Thus, the investments in capital goods increases at a hiigher rate.

This will lead to increase in productivity in the economy which will increase in growth in GDP in the economy.

The increased productivity leads to increased incomes and the standard of living of the perople is on the rise.

All this will help improving, increasing and contributing to the rapid growth of the economy.

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