It has been argued that the information technology age has greatly increased productivity and potential output. If this is true:
A) the long-run real interest rate is also higher as a result.
B) nominal long-run interest rates should have increased.
C) we should have seen lower short-run interest rates than we have seen.
D) the long-run real interest rate is lower as a result.

Question

Quizplus · Accepted Answer

The increased productivity and potential output resulting from the information technology age should increase the supply of loanable funds, leading to a lower long-run real interest rate. This is because the increased productivity and potential output increases the return on investment, making it more attractive for individuals and businesses to save and invest. As a result, the increased supply of loanable funds puts downward pressure on the real interest rate.

It Has Been Argued That the Information Technology Age Has