<p>Could you guys help me with this question:</p>

<p>What is the long run effect of a decrease in savings on output per capita ?</p>

<p>To me a decrease in savings will mainly increase increase consumtption and push the steady state  to the left. I don't really see the impact on output per capita in the long run</p>

CC BY-SA 3.0
2015-10-14T17:57:09.913Z
I assume you mean the savings *rate*. There is a sweet spot for the savings rate when it comes to long-run output. Its called the "golden rule". If initially the savings rate is above it and you decrease it (but it still remains at least as large or above the golden rule) then output per capita will raise. If its below it will fall. Most economies exhibit savings rates that are too low, so in practice it would probably fall.

Search for: Solow Model and Golden Rule
BB King
CC BY-SA 3.0
2015-10-14T18:07:40.550Z
Yes I meant savings rate. I was just looking at a general case. For a case studies. The savings rate in the US went from 8,3 in the 1960s to 5,9  in the 1990s so to me it would imply a decrease in output per capita from what I know.
Dole
CC BY-SA 3.0
2015-10-14T18:18:23.817Z
That would c.p. imply a decrease, yes. However a lot of other things happened in the meantime too, like technology advances. I can really recommend any basic exposition of the Solow Model and golden rule. It is quite intuitive once you read through it.
BB King
CC BY-SA 3.0
2015-10-14T18:22:12.933Z
No problem, anytime :)
BB King
CC BY-SA 3.0
2015-10-14T20:19:18.507Z
_"Push the steady-state to the left"._ This is vague and confusing. The steady-state of what variables? What is the implication if it is "pushed to the left"? Some variable decreases? Which? Please edit your question to clarify these things.
Alecos Papadopoulos
<macroeconomics>
Long run effect of decrease in savings on output per capita
Dole
# Long run effect of decrease in savings on output per capita

(Asked by: username_0 on 2015-10-14)

Could you guys help me with this question:

What is the long run effect of a decrease in savings on output per capita ?

To me a decrease in savings will mainly increase increase consumtption and push the steady state to the left. I don't really see the impact on output per capita in the long run

**Tags:** macroeconomics

> **Comments:**
> **username_1**: I assume you mean the savings *rate*. There is a sweet spot for the savings rate when it comes to long-run output. Its called the "golden rule". If initially the savings rate is above it and you decrease it (but it still remains at least as large or above the golden rule) then output per capita will raise. If its below it will fall. Most economies exhibit savings rates that are too low, so in practice it would probably fall.  Search for: Solow Model and Golden Rule  
> **username_0**: Yes I meant savings rate. I was just looking at a general case. For a case studies. The savings rate in the US went from 8,3 in the 1960s to 5,9  in the 1990s so to me it would imply a decrease in output per capita from what I know.  
> **username_1**: That would c.p. imply a decrease, yes. However a lot of other things happened in the meantime too, like technology advances. I can really recommend any basic exposition of the Solow Model and golden rule. It is quite intuitive once you read through it.  
> **username_1**: No problem, anytime :)  
> **username_2**: _"Push the steady-state to the left"._ This is vague and confusing. The steady-state of what variables? What is the implication if it is "pushed to the left"? Some variable decreases? Which? Please edit your question to clarify these things.  

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