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Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126

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BuyFindarrow_forward

Principles of Economics (MindTap C...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305585126
Chapter 1, Problem 10PA
Textbook Problem
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Suppose Americans decide to save more of their in-comes. If banks lend this extra saving to businesses, which use the funds to build new factories, how might this lead to faster growth in productivity? Who do you suppose benefits from the higher productivity? Is society getting a free lunch?

To determine
Growth in productivity.

Explanation of Solution

If the Americans decided to save more and the banks lend extra savings to business (which are used to spend for new factories), then there will be an increase in the production and productivity. The productivity means high efficiency production...

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