In the real business cycle framework, a technology shock that increases investment demand and the demand for loanable funds leads to a_________ quantity of saving and a _________real interest rate.

Question

Quizplus · Accepted Answer

A technology shock that increases investment demand and the demand for loanable funds would lead to a higher quantity of saving (as households save more to take advantage of higher real interest rates) and a higher real interest rate (as the increase in investment demand and demand for loanable funds pushes up the cost of borrowing).

In the Real Business Cycle Framework, a Technology Shock That