If the per-worker production function is y = Ak, where A is a positive constant, in the steady state, a: lower saving rate leads to a higher growth rate. higher saving rate does not affect the growth rate. higher saving rate leads to a higher growth rate. lower saving rate does not affect the growth rate.

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Business

Jean Erickson

22 November, 01:25

If the per-worker production function is y = Ak, where A is a positive constant, in the steady state, a: lower saving rate leads to a higher growth rate. higher saving rate does not affect the growth rate. higher saving rate leads to a higher growth rate. lower saving rate does not affect the growth rate.

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Leonel · Answer 1

Higher savings rate leads to higher growth rate

Explanation:

since the per-worker production function has a positive constant A it therefore means that the per - worker productivity will increase positively in the steady state and will cause Higher savings rate which will lead to higher growth rate of the capital a worker has at a given time.

but note that this does not result to a higher growth rate in the per worker output while considering the balance growth path in the steady state situation as well.