In the classical model, the interest rate will adjust to equate
A) consumption spending with real GDP.
B) saving with investment.
C) the economic growth rate with the growth rate of import spending.
D) export spending with import spending.

Question

Quizplus · Accepted Answer

In the classical model, saving and investment are assumed to be equal in the long run. Therefore, the interest rate will adjust to equate saving with investment, ensuring that the capital market clears.

In the Classical Model, the Interest Rate Will Adjust to Equate