1. Consider a country in steady state with the following production function: y=1/2 and saving rate s=0.3. Assume that in period 1 the savings rate increases so that s=0.35. In the new steady state, consumption:
A. Will be smaller.
B. Will go back to the same level as in the initial steady state.
C. Will be larger.
D. It is impossible to say without additional information.
