Question
In the Classical model of the closed economy in the long-run investment is negatively related to the real rate of interest because a higher real
In the Classical model of the closed economy in the long-run investment is negatively related to the real rate of interest because
a higher real interest rate represents a greater real return to saving and thus agents wish to save less.
none of the other options are correct.
a higher real interest rate represents a greater real cost to borrow and thus agents wish to borrow less.
a higher real interest rate represents a greater real return to saving and thus agents wish to save more.
a lower real interest rate represents a greater real cost to borrow and thus agents wish to borrow less.
we assume this is so
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