Ongoing technological improvement over the past four decades in Canada has led to continual increases in investment demand,and an increase in the flow of investment,but no clear trend in the interest rate.The reason that we have not seen continual increases in the interest rate over this time period is that

Question

Quizplus · Accepted Answer

Technological change has led to rising productivity and incomes, which in turn increases the supply of savings. This has prevented a continual increase in interest rates despite the ongoing increase in investment demand. Option A is incorrect because excess demand for capital would lead to an increase in interest rates, not a decrease. Option B is incorrect because the supply of saving would shift along with the investment demand curve, it wouldn't shift in the opposite direction. Option C is incorrect because the government's intervention in the capital market could have various effects on interest rates, but it doesn't explain why interest rates haven't continually increased over the past four decades. Option E is incorrect because the size of the investment flow is not the main factor influencing interest rates in the long run.

Ongoing Technological Improvement Over the Past Four Decades in Canada