In the classical model with fixed income, an increase in the real interest rate could be the result of:
A)an increase in government spending.
B)a decrease in government spending.
C)a decrease in desired investment.
D)an increase in taxes.

Question

Quizplus · Accepted Answer

An increase in government spending can lead to higher demand for funds, driving up the real interest rate in the classical model with fixed income.

In the Classical Model with Fixed Income, an Increase in the Real