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

Question

Quizplus · Accepted Answer

An increase in taxes reduces disposable income, leading to lower consumption and saving, which can decrease the real interest rate in the classical model with fixed income.

In the Classical Model with Fixed Income a Decrease in the Real