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

In the long-run theory of investment, saving, and growth, a decrease in private consumption or government purchases increases national saving. With more savings available, the equilibrium interest rate falls, encouraging more investment. Hence, the flow of investment increases.

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