According to the classical model shown above,an autonomous decline in investment shifts the investment schedule to the left.Furthermore,the equilibrium interest rate declines.Distance A describes an interest rate induced

Question

Quizplus · Accepted Answer

In the classical model, a decline in investment leads to a lower equilibrium interest rate, which reduces the incentive to save. This reduction in saving is matched by an equal increase in consumption, as individuals choose to consume more rather than save at the lower interest rate.

According to the Classical Model Shown Above,an Autonomous Decline in Investment