- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics
- Reading 11. Economic Growth and the Investment Decision
- Subject 5. Theories of Growth
CFA Practice Question
According the neoclassical growth theory, in the long run, if there is a decrease in the savings rate:
II. Capital per head will decrease.
III. Output per head will increase.
IV. Output per head will decrease.
V. The economy's growth rate will decrease.
VI. The economy's growth rate will remain the same.
VII. The economy's growth rate will increase.
I. Capital per head will increase
II. Capital per head will decrease.
III. Output per head will increase.
IV. Output per head will decrease.
V. The economy's growth rate will decrease.
VI. The economy's growth rate will remain the same.
VII. The economy's growth rate will increase.
A. II, IV and VII.
B. I, III and V.
C. II, IV and VI.
Explanation: The decrease in the savings rate causes saving and investment to decrease, the stock of capital per head and output per head to decrease. The economy's growth rate remains the same in the long run.
User Contributed Comments 1
| User | Comment |
|---|---|
| dblueroom | saving rate only impacts in the short-term |