Which one of the following statements is true?
A) In the classical model, the supply of saving is determined by the rate of interest.
B) In the classical model, the supply of saving is determined by the level of income.
C) In the Keynesian model, the supply of saving is determined by the rate of interest.
D) In the Keynesian model, the supply of saving is determined by the level of investment.

Question

Quizplus · Accepted Answer

In the classical model, the supply of saving is determined by the rate of interest, as individuals will be more willing to save at higher interest rates. This is based on the assumption that savings are determined by intertemporal decisions, where individuals decide how much to consume and how much to save based on the expected future returns on their investments.

Which One of the Following Statements Is True