Consider the Flow of Investment and Saving in a Small

Multiple Choice

Consider the flow of investment and saving in a small economy.Suppose the equilibrium interest rate is 2.5% and the equilibrium level of saving and investment is $4 billion.Now suppose,all else remaining equal,that there is sustained population growth over several years.What will be the effect in the capital market?

A) An increase in the flow of investment and saving and an indeterminate effect on the equilibrium interest rate.
B) An increase in the flow of investment and saving and an increase in the equilibrium interest rate.
C) An increase in the flow of investment and saving and a decrease in the equilibrium interest rate.
D) An indeterminate effect on the flow of investment and saving and a decrease in the equilibrium interest rate.
E) An indeterminate effect on the flow of investment and saving and an increase in the equilibrium interest rate.