In the classical theory of employment,a decline in the rate of interest will

Question

Quizplus · Accepted Answer

According to the classical theory of employment, a decline in the rate of interest will increase investment because it becomes cheaper for firms to borrow and invest in new projects. However, it will also decrease saving because households will have less incentive to save their money in banks since the interest rate is lower. Therefore, the correct answer is B as it reflects the increase in investment and decrease in saving.

In the Classical Theory of Employment,a Decline in the Rate