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Suppose Americans decide to save more of their incomes. If banks lend this extra saving
Chapter 1, Problem Problems and Applications 1.12(choose chapter or problem)
Suppose Americans decide to save more of their incomes. If banks lend this extra saving to businesses, which use the funds to build new factories, how might this lead to faster growth in productivity? Who do you suppose benefits from the higher productivity? Is society getting a free lunch?
Questions & Answers
QUESTION:
Suppose Americans decide to save more of their incomes. If banks lend this extra saving to businesses, which use the funds to build new factories, how might this lead to faster growth in productivity? Who do you suppose benefits from the higher productivity? Is society getting a free lunch?
ANSWER:Step 1 of 2
A rise in business investment would lead to faster growth in productivity. Both households and firms benefit from higher productivity. However, society does not enjoy free lunch.