When the goods market is returning to equilibrium following a decrease in the real interest rate,________.
A)saving and output are both rising
B)saving and output are both declining
C)saving is rising,while output declines
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

When real interest rates decrease, consumption and investment increase, which leads to an increase in output. As output increases, so does saving. Therefore, saving and output are both rising as the goods market returns to equilibrium.

When the Goods Market Is Returning to Equilibrium Following a Decrease