Consider an exogenous increase in the real interest rate in the simple macro model.This will tend to cause ________ in desired consumption and ________ in desired investment.

Question

Quizplus · Accepted Answer

An increase in the real interest rate makes saving more attractive relative to consumption, leading to a decrease in desired consumption. It also makes borrowing more expensive, which tends to decrease desired investment.

Consider an Exogenous Increase in the Real Interest Rate in the Simple