In the Classical Model with Fixed Income, If Households Want

question 42

Multiple Choice

In the classical model with fixed income, if households want to save more than firms want to invest, then:

• A) the interest rate rises.
• B) the interest rate falls.
• C) output increases.
• D) output falls.

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Definitions:

Federal Reserve System

The central banking system of the United States, responsible for regulating the country's monetary policy and banking institutions.

Deposits In Reserve

Money that commercial banks are required to keep in the form of vault cash or deposits with the central bank, as a regulation to ensure banks can meet depositor demands.

Money Supply

The total amount of currency and other liquid instruments in a country's economy as of a particular time.

Leakage Current

The undesired flow of electrical current through an insulating medium or unintended path, often leading to inefficiencies or safety concerns.