How would the equilibrium interest rate change when there is increase in the volume of savings by different sectors of the economy? Explain it with the help of a graph.
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Answer:
When the economy is doing well, the rate of return on any investment spending will increase. That means the demand for loanable funds will increase, which leads to a higher real interest rate.
Answer:
When the economy is doing well, the rate of return on any investment spending will increase. That means the demand for loanable funds will increase, which leads to a higher real interest rate.