In the long run,an increase in the demand for investment pushes ________ the real interest rate,encourages ________ saving by households,and leads to a ________ future growth rate of potential output.

Question

Quizplus · Accepted Answer

An increase in demand for investment puts upward pressure on the real interest rate as investors compete for available funds. This higher interest rate encourages households to save more, as they can earn a higher return on their savings. The increased investment and savings contribute to higher future growth rates of potential output.

In the Long Run,an Increase in the Demand for Investment