Suppose that the U. S. undertakes a policy to increase its saving rate. This policy will likely a. have no impact on the growth rate of real GDP per person. b. decrease the growth of real GDP per person for a few years. c. increase the growth of real GDP per person for several decades. d. permanently increase the growth rate of real GDP per person

Question

Adam Holden

Business

15 December, 17:55

Suppose that the U. S. undertakes a policy to increase its saving rate. This policy will likely a. have no impact on the growth rate of real GDP per person. b. decrease the growth of real GDP per person for a few years. c. increase the growth of real GDP per person for several decades. d. permanently increase the growth rate of real GDP per person

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Andrea Baird · Answer 1

C) Increase the growth of real GDP per person for several decades.

Explanation:

Currently, the U. S. government is running a deficit of about 4% of GDP. This deficit affects economic growth, it causes tax increases or even more debt, and it leads to the misallocation of resources.

If the U. S. undertook a policy to increase national saving, it could reduce the deficit, or even, run a surplus. Under a surplus budget, the government could reduce taxes, or keep them low, and use most of the tax revenue for investments that produce growth, for example: infraestructure.