Classical economists argue this because more people save money if interest rates rise, meaning that they will have more disposable income meaning that they will spend more. Furthermore, interest rates determine whether people make investments; if interest rates are high then people will be less inclined to invest and vice versa. If people save more then banks will have more savings to give out to investors but they will only do this at a decreased interest rate, leading to an equilibrium. This means that interest rates are the dictator of the aggregate growth of the economy according to classical
Classical economists argue this because more people save money if interest rates rise, meaning that they will have more disposable income meaning that they will spend more. Furthermore, interest rates determine whether people make investments; if interest rates are high then people will be less inclined to invest and vice versa. If people save more then banks will have more savings to give out to investors but they will only do this at a decreased interest rate, leading to an equilibrium. This means that interest rates are the dictator of the aggregate growth of the economy according to classical