It has been argued that the information technology age has greatly increased productivity and potential output.If this is true:
A)The long-run real interest rate is also higher as a result
B)Nominal long-run interest rates should have increased
C)We should have seen lower short-run interest rates than we have seen
D)The long-run real interest rate is lower as a result

Question

Quizplus · Accepted Answer

With an increase in productivity and potential output, the economy experiences an increase in real income, which leads to a higher demand for investment. This higher demand for investment increases the supply of loanable funds, leading to a decrease in the real interest rate in the long-run. Therefore, the long-run real interest rate is lower as a result of the information technology age.

It Has Been Argued That the Information Technology Age Has