In the classical model of a closed economy, which of the following best describes the effect of an increase in the real interest rate on national savings and investment, assuming the economy is initially in equilibrium?

In the classical model of a closed economy, assume that the government decides to increase its spending (G) without increasing taxes. What is the most likely impact on the equilibrium real interest rate and investment, assuming national output is fixed?

In the Classical Model of a Closed Economy, which of the following statements is true regarding the relationship between savings, investment, and interest rates?

Suppose the government of Lilliput, a closed economy, increases its spending while investment demand rises simultaneously. Briefly discuss the long-run impact on private saving, public saving, national saving, the domestic real interest rate, and investment according to the classical model of a closed economy (5 marks).Note: Explain your answers for national saving, the domestic real interest rate and investment by mentioning the impacted curve(s) and direction of curve shifts in the market for loanable funds.

What impact will the increase in investment demand have on the real interest rate of the small open economy? Briefly explain your answer. (2 marks)

In a classical open economy model, what happens if domestic saving increases while investment remains constant?A.The trade balance will turn into a trade surplusB.Domestic interest rates will riseC.The real exchange rate will riseD.The trade balance will turn into a trade deficit