Asked by Andrew Oriold on May 25, 2024
Verified
According to the classical economists,if the quantity of money that people wanted to save was less than the amount that people wanted to invest,
A) the interest rate would fall.
B) the interest rate would rise.
C) this situation would cause hyperinflation.
D) this situation would cause stagflation.
Classical Economists
Economists from the 18th and 19th centuries who advocated for free markets, minimal government intervention, and believed in the theory of self-regulating economies.
Quantity of Money
The total amount of money in circulation or in existence within an economy at a given time.
Interest Rate
The price, in terms of a percentage of the principal, a borrower incurs from a lender to utilize assets.
- Understand the critical role of aggregate demand and supply in the context of economics.
- Apprehend the influence of budgetary policies and monetary regulations on the occurrence of recessions and the escalation of inflation.
Verified Answer
FT
Farhan tasleemMay 28, 2024
Final Answer :
B
Explanation :
Classical economists argue that if the desire to save exceeds the desire to invest, the surplus of savings would lead to an increase in the interest rate. This is because banks and other financial institutions would have more funds to lend, leading to a competitive market where borrowers are willing to pay higher interest rates for access to the excess savings.
Learning Objectives
- Understand the critical role of aggregate demand and supply in the context of economics.
- Apprehend the influence of budgetary policies and monetary regulations on the occurrence of recessions and the escalation of inflation.