Consider the Flow of Investment and Saving in a Small

question 34

Multiple Choice

Consider the flow of investment and saving in a small economy.Suppose the equilibrium interest rate is 2.5% and the equilibrium level of saving and investment is $4 billion.Now suppose,all else remaining equal,that there is an increase in per capita income.What will be the effect in the capital market?

• A)the interest rate will rise above 2.5% and the quantity of saving supplied will increase
• B)the interest rate will fall below 2.5% and the quantity of investment demanded will increase
• C)an indeterminate effect on the interest rate and an increase in the equilibrium level of investment and saving
• D)the interest rate will fall below 2.5% and the quantity of saving supplied will increase
• E)the interest rate will rise above 2.5% and the quantity of investment demanded will decrease

---

Definitions:

Mental Retardation

A term historically used to describe a level of intellectual functioning significantly below average, characterized by difficulties in learning and adaptive behaviors. It's now more commonly referred to as intellectual disability.

DSM-IV

The fourth edition of the Diagnostic and Statistical Manual of Mental Disorders, a handbook used by healthcare professionals as a guide to diagnosing mental disorders.

DSM-IV

The Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition, a manual published by the American Psychiatric Association that classifies mental disorders.

Psychological Disorders

Mental health conditions characterized by significant disturbances in an individual's thoughts, feelings, or behaviors, which can impact daily functioning.