What does the Classical model predict about the relationship between a country's budget balance (total revenue minus total spending)and a country's level of real interest rates and investment in a closed economy? Use a graph of the capital market to illustrate.

Question

Quizplus · Accepted Answer

The Answer is A higher budget deficit shifts the I+(G-T)curve to the right,increasing real interest rates.Higher real interest rates lead to a reduction in the quantity demanded of investment.

What Does the Classical Model Predict About the Relationship Between