MACRO ECON HELP PLEASE.A decrease in personal saving ____ the real interest rate and ____ investment in the US

Question

In 2006, the U.S. Commerce Department reported that Americans' personal saving rate fell to -0.5%, which is the lowest personal saving rate since the Great Depression of the 1930s. The decrease in the personal saving rate is due to a substantial decrease in personal saving. The following questions will examine the effects of a decrease in personal saving on national saving, investment, net capital inflows, and the trade balance

A decrease in personal saving ____ the real interest rate and ____ investment in the United States.

A. Decreases; decreases

B. Decreases; increases

C. Increases; increases

D. Increases; decreases

Answer 1

B

Answer 2

1:

D. Increases; decreases

Saving function will shift left and with unchanged demand for desired investment it will increase equilibrium interest rate.

2:

B. Decreases; increases

Because of higher interest rate world investors will move capital into US (capital inflow) thus increasing import and consequently reducing net exports (trade balance).