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2. The theory of economic growth has the golden rule of saving rate. According to the...

2. The theory of economic growth has the golden rule of saving rate. According to the theory, if the savings rate is in line with the golden law, what will be the benefits? If the savings rate is higher than the golden law, what will be the consequences?

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Answer #2

If savings rate is in line with the golden law than its benefits are

. It maximise the steady state level of growth of consumption. It means the consumption is at its highest level permanently.

. The consumer will be at its highest level of satisfaction at this point.

. The economy will grow at a good rate.

If saving is higher than the golden law than its consequences are-

. Interest rate will fall in an economy this leads to low investment in an economy.

. Demand for product and services will fall for a period of time.

. There will be more borrowing in the economy by businessmen and consumers.

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