Consider the long-run theory of investment,saving,and growth.For a given level of national income,a decrease in private consumption or government purchases will cause the equilibrium interest rate to

Question

Quizplus · Accepted Answer

A decrease in private consumption or government purchases, with a given level of national income, leads to an increase in national saving because less is being consumed or spent by the government. This increase in saving leads to a surplus of funds available for lending, which puts downward pressure on the interest rate.

Consider the Long-Run Theory of Investment,saving,and Growth