The Classical Theory Predicts That an Increase in the Supply

question 90

Multiple Choice

The classical theory predicts that an increase in the supply of savings will

• A)lower interest rates and reduce investment.
• B)lower interest rates and expand investment.
• C)raise interest rates and reduce investment.
• D)raise interest rates and expand investment.

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Definitions:

Semi-Annually

Occurring or calculated over half a year; typically refers to interest computed twice a year.

Trust Fund

A legal entity established to hold assets on behalf of a person or group, often used for estate planning or to manage money for beneficiaries.

Present Value

A payment’s economically equivalent amount at a prior date, allowing for the time value of money.

Compounded Annually

Describes the process of calculating interest on both the initial principal and the accumulated interest from previous periods once a year.