Rate of savings


why high rate of savings boost the economy?


Muller knows that government policies can have a significant impact on economic growth. Which of the following policies is least likely to foster a productivity speedup?

A) Pass laws that encourage higher rates of savings. B) Restrict international trade. C) Foster technological advancement.

Your answer: B was correct!

Technological advancement and higher rates of savings are important factors that tend to promote economic growth. (Study Session 4, LOS 14.b)

High rate of savings -> more domestic loanable funds > lesser interest rates > more investments by firms b/c cheaper capital (projects more valuable) > more jobs > greater economy