The classical economists assumed that savings and investment are equal because:
A) the interest rate brings savings into equality with investment.
B) the only reason investment occurs is to utilize funds that have been saved.
C) saving and investing are typically carried out by the same individuals in society.
D) savers and investors base their decisions on tax laws, which tend to coordinate their actions.

Question

Quizplus · Accepted Answer

The classical economists believed that the interest rate would adjust to equate savings and investment, as the interest rate would rise or fall to encourage or discourage saving and investment until they were equal.

The Classical Economists Assumed That Savings and Investment Are Equal