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

Question

Quizplus · Accepted Answer

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

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