Ongoing technological improvement over the past four decades in Canada has led to continual increases in investment demand, and an increase in the flow of investment, but no clear trend in the interest rate. The reason that we have not seen continual increases in the interest rate over this time period is that

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Technological change not only leads to an increase in investment demand but also an increase in productivity and incomes, which in turn increases the supply of saving. This increase in the supply of saving offsets the increase in investment demand, preventing a clear trend in the interest rate. Option A is incorrect because the flow of investment alone is not enough to offset changes in the interest rate. Option C is incorrect because excess demand for capital would lead to an increase in interest rates, not a decrease. Option D may have some impact, but it is not significant enough to explain the lack of a clear trend in interest rates over the past four decades in Canada. Option E is incorrect because an increase in investment demand would cause the supply of saving curve to shift right, not left.

Ongoing Technological Improvement Over the Past Four Decades in Canada