According to classical economists,if interest rates are flexible,
A) saving will equal investment.
B) saving may be greater than investment.
C) saving may be less than investment.
D) any of the above

Question

Quizplus · Accepted Answer

Classical economists believed in the concept of the 'loanable funds market,' where interest rates adjust to achieve equilibrium between saving and investment. If interest rates are flexible, then they can adjust to the level where saving equals investment and the loanable funds market clears. Therefore, the correct option is A, where saving will equal investment.

According to Classical Economists,if Interest Rates Are Flexible