Answer :
Final answer:
An increase in the saving rate does not affect the growth rate of output per worker in the long run. While it can temporarily impact the amount of capital in the economy and capital per worker, it's ultimately worker productivity that shapes the growth rate of output per worker.
Explanation:
An increase in the saving rate affects different variables in an economy, though one variable remains unaffected in the long run - the growth rate of output per worker. It means any increase in the saving rate over time will not perpetually increase the growth rate of output per worker. This stems from the fact that productivity growth is the most critical factor that shifts the AS (Aggregate Supply) curve over the long run, not the saving rate.
Productivity refers to how much output can be produced by a given quantity of labor, often measured as output per worker, or GDP per capita. As productivity grows over time, the same quantity of labor generates more output. However, a rise in the saving rate will not necessarily enhance the productivity of each worker.
Although an increase in the saving rate can boost the amount of capital in the economy and capital per worker in the short run, it's the productivity of those workers and that capital that determines the long run growth rate of output per worker.
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