# 2. Classical economists and interest rate flexibility According to Say’s law, funds (money) saved… 1 answer below »

rate flexibility According to Says law, funds (money) saved must give rise to an equal amount of funds (money) invested The following graph shows the saving curve (S) and the investment curve (l) for a small economy. Show the effect of an increase in total saving at any interest rate in this economy, which behaves according to the classical view, by dragging one or both of the curves Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original position, just try again and drag it a little farther The Classical View of the Credit Market DOLLARS SAVED OR INVESTED The following table shows data for the economy before the increase in saving. Suppose that the increase in saving causes consumption to fall from $320 million to $280 million. Assume Says law holds in this economy. Fill in the data for the economy after the increase in saving. Before Saving Increase After Saving Increase Consumption (C) Investment (I) Government Purchases (G) Exports (EX) Imports (IM) 320 million $160 million $250 million $500 million $300 million $280 million million million $500 million $300 million As a result of the increase in total saving, total expenditures will ” src=”https://files.transtutors.com/cdn/questions/transtutors006/images/transtutors006_ea27e694-e182-4848-98f0-248366cb5ad1.png”>

2. Classical economists and interest rate flexibility According to Say’s law, funds (money) saved must give rise to an equal amount of funds (money) invested The following graph shows the saving curve (S) and the investment curve (l) for a small economy. Show the effect of an increase in total saving at any interest rate in this economy, which behaves according to the classical view, by dragging one or both of the curves Tool tip: Click and drag one or both of the curves. Curves will snap into position, so if you try to move the curve and it snaps back to its original position, just try again and drag it a little farther The Classical View of the Credit Market DOLLARS SAVED OR INVESTED The following table shows data for the economy before the increase in saving. Suppose that the increase in saving causes consumption to fall from $320 million to $280 million. Assume Say’s law holds in this economy. Fill in the data for the economy after the increase in saving. Before Saving Increase After Saving Increase Consumption (C) Investment (I) Government Purchases (G) Exports (EX) Imports (IM) 320 million $160 million $250 million $500 million $300 million $280 million million million $500 million $300 million As a result of the increase in total saving, total expenditures will