Suppose that society decided to reduce consumption and increase investment. More investment leads to economic growth in the short run. Which of the following statements are true about groups in society that would benefit from or be hurt by this change? A. There might be a transition period in which workers and owners in consumption-good industries would get lower incomes. B. All groups can increase their spending. C. Some people will have higher incomes as the result of faster economic growth. D. There might be a transition period in which workers and owners in investment-good industries would get lower incomes.

Suppose that society decided to reduce consumption and increase investment. More investment leads to LOWER economic growth in the short run.

Which of the following statements are true about groups in society that would benefit from or be hurt by this change?

Explanation:

Higher investment levels lead to higher growth rates and productivity in the long run. In the short run, lower consumption levels (most important component of the GDP) will result in lower economic growth.

Consumers either spend or save their money. Spending is given by the marginal propensity to consume (MPC), while saving is given by the marginal propensity to save (MPS = 1 - MPC). Higher savings will always increase a nation's wealth in the long run, but there will be a transition period where the economy will suffer, but that transition period is generally short. The benefits of increased savings offset by far the hardships of decreased spending.