The classical theory predicts that an increase in the supply of savings will

A) lower interest rates and reduce investment.
B) lower interest rates and expand investment.
C) raise interest rates and reduce investment.
D) raise interest rates and expand investment.

Classical Theory

A school of thought in economics that emphasizes free markets, competition, and the minimal involvement of government in the economy.

Supply of Savings

The total amount of savings that individuals and institutions are willing to provide at different interest rate levels.

Interest Rates

Interest rates refer to the cost borrowing money, usually expressed as a percentage of the amount borrowed per annum.