Exhibit: Saving, Investment, and the Interest Rate 1 the Economy

question 66

Multiple Choice

Exhibit: Saving, Investment, and the Interest Rate 1 The economy begins in equilibrium at point E, representing the real interest rate r₁ at which saving S₁ equals desired investment I₁. What will be the new equilibrium combination of real interest rate, saving, and investment if the government increases spending, holding other factors constant?

• A)point A
• B)point B
• C)point C
• D)point D

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Definitions:

Bonus

An additional amount of money given to an employee on top of their regular salary, often as a reward for good performance or as part of a special agreement.

Present Value

The current value of a future sum of money or stream of cash flows, discounted at a specific interest rate.

Bond

A bond is a fixed income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental.

Rule Of 70

The Rule of 70 is a calculation method used to estimate the number of years required for an investment or the economy's GDP to double, based on a constant annual growth rate.