Consider the flow of investment and saving in a small economy.Suppose the equilibrium interest rate is 2.5% and the equilibrium level of saving and investment is $4 billion.Now suppose,all else remaining equal,that there is an increase in per capita income.What will be the effect in the capital market?
A) the interest rate will fall below 2.5% and the quantity of investment demanded will increase
B) the interest rate will rise above 2.5% and the quantity of saving supplied will increase
C) the interest rate will rise above 2.5% and the quantity of investment demanded will decrease
D) an indeterminate effect on the interest rate and an increase in the equilibrium level of investment and saving
E) the interest rate will fall below 2.5% and the quantity of saving supplied will increase
Correct Answer:
Verified
Q97: Consider the economy's upward-sloping supply of saving
Q98: For the economy as a whole,the equilibrium
Q99: The diagram below shows the market for
Q100: Q101: Over the past four decades,Canada's non-residential capital Q102: In recent decades the economy has experienced Q103: The Canadian government introduced the Tax-Free Savings Q105: Ongoing technological improvement over the past four Q106: Consider the flow of investment and saving Q107: The Canadian federal government can encourage a
Unlock this Answer For Free Now!
View this answer and more for free by performing one of the following actions
Scan the QR code to install the App and get 2 free unlocks
Unlock quizzes for free by uploading documents