The classical theory predicts that decreases in the supply of savings will _______ interest rates and _______ investment.
Fill in the blank(s) with the appropriate word(s).
raise; decrease
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Suppose that elementary education creates a positive externality. If the government subsidizes education by an amount equal to the per-unit externality it creates, then
a. the equilibrium quantity of education will equal the socially optimal quantity of education. b. the equilibrium quantity of education will be greater than the socially optimal quantity of education. c. the equilibrium quantity of education will be less than the socially optimal quantity of education. d. There is not enough information to answer the question.
Suppose a business experiences a sudden increase in its fixed costs. For example, suppose property taxes increase dramatically. What impact, if any, will this have on the firm's AFC (average fixed cost), AVC (average variable cost), ATC (average total cost) and MC (marginal cost) and therefore these cost curves? Why?