Question

Which of the following statements is​ true?

A.

If you want more​ tomorrow, you have to produce more today.

B.

Higher saving rates lower living standards.

C.

Investment in our capital stock lowers our growth rate and living standards.

D.

A higher saving rate allows us to invest in our capital stock and results in economic growth.

Answer 1

Of the given statements, (D) higher savings rate allow us to invest in capital stock which results in economic growth is true. This is because when an economy chooses to spend more on capital or investment goods, it provides itself with a wider range of production possibilities. Increasing the resource base will shift the long-run aggregate supply curve outward. As a result, the long-run equilibrium will occur at a higher output level and lower prices, thus increasing economic growth.

Ans. (D)