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    Question

    An increase in savings in an economy typically leads to

    which of the following? 
    A Higher consumption in the short term Correct Answer Incorrect Answer
    B Increased investment Correct Answer Incorrect Answer
    C Lower levels of investment Correct Answer Incorrect Answer
    D Reduced GDP Correct Answer Incorrect Answer

    Solution

    Higher savings can lead to increased investment as savings provide the funds needed for capital formation. This, in turn, can drive economic growth by financing new projects and infrastructure.

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