Total output produced by a nation must somehow be divided among competing sectors of the economy, that is, consumption, investment, government, and the foreign sector. The long-run growth model attributes the central role for this dividing process to

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Interest rates play a central role in dividing the total output among the different sectors of the economy in the long-run growth model by influencing investment decisions, consumption, and savings.

Total Output Produced by a Nation Must Somehow Be Divided