Holding other factors constant, if growing concerns about job security raise precautionary saving, then the real interest rate will ________ and the equilibrium quantity of national saving and investment will ________.
A)increase; increase
B)increase; decrease
C)decrease; decrease
D)decrease; increase

Question

Quizplus · Accepted Answer

When precautionary saving increases, shifting the supply of savings right, the real interest rate falls but the quantity of, national saving and investment increase.

Holding Other Factors Constant, If Growing Concerns About Job Security