1. saving a bigger fraction of their lifetime incomes.
2. having smaller families.
3. doing either of the above.
4. doing none of the above.
Choose the correct option.
Option 3 is the correct choice. Saving a bigger fraction of lifetime income results in a larger capital stock being passed on the the next generation. Given the size of family, this will increase per capita income from this generation to next by a greater amount than otherwise. By having fewer children and saving the same fraction of lifetime income, the current generation can also bring about a greater increase in the next generation's per capita income. This answer assumes, of course, that an increase in the fraction of income saved will not be accompanied by an increase in family size, and that a reduction in family size will not be accompanied by reduced saving.