Consider the Flow of Investment and Saving in a Small

question 36

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 sustained population growth over several years.What will be the effect in the capital market?

• A)An increase in the flow of investment and saving and an indeterminate effect on the equilibrium interest rate.
• B)An increase in the flow of investment and saving and an increase in the equilibrium interest rate.
• C)An increase in the flow of investment and saving and a decrease in the equilibrium interest rate.
• D)An indeterminate effect on the flow of investment and saving and a decrease in the equilibrium interest rate.
• E)An indeterminate effect on the flow of investment and saving and an increase in the equilibrium interest rate.

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