In the long run, an increase in the saving rate a. doesn’t change the level of productivity or income. b. raises the levels of both productivity and income. c. raises the level of productivity but not the level of income. d. raises the level of income but not the level of productivity.

b. raises the levels of both productivity and income.

Explanation:

An economy is a function of how money, means of production and resources (raw materials) are carefully used to facilitate the demands and supply of goods and services to meet the unending needs or requirements of the consumers.

Hence, a region's or country's economy is largely dependent on how resources are being allocated and utilized, how many goods and services are to be produced, what should be produced, for whom they are to be produced for and how much money are to be spent by the consumers to acquire these goods and services.

A saving rate can be defined as a measure of the amount of money that an individual, business firm or country deducts from its total disposable income to save over a period of time. It is typically expressed as a percentage or ratio.

Basically, savings are very important for long-term plans and investments.

In the long run, an increase in the saving rate raises both the levels of productivity and income generated by a business firm or a country.

For example, a country that increases its saving rate would also experience an increase in the level of its income, Real gross domestic product (GDP) per person, and productivity in the long-run.

This ultimately implies that, a country with a low saving rate would have a lower productivity and lower Real gross domestic product (GDP) per person, all things being equal (ceteris paribus).

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