In the classical view of the credit market,a rise in saving produces a rise in investment via a
A) rising interest rate.
B) falling interest rate.
C) rising price level.
D) falling price level.

Question

Quizplus · Accepted Answer

In the classical view of the credit market, a rise in saving leads to a fall in interest rates. With lower interest rates, borrowing becomes cheaper for firms, leading to an increase in investments. Therefore, choice B, a falling interest rate, is the correct answer. Choices A, C, and D do not align with the classical view of the credit market.

In the Classical View of the Credit Market,a Rise in Saving