Answered: Suppose an economy has reached its…

Suppose an economy has reached its steady state. If agents decide to save and invest a larger fraction of their income then GDP:

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter9: Aggregate Expenditures

Section: Chapter Questions

Problem 12E

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

Suppose an economy has reached its steady state.
If agents decide to save and invest a larger fraction of their income then GDP:
starts shrinking
starts growing
is unaffected

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