Question

Holding other factors constant, if employers automatically enroll employees in retirement savings programs in order to overcome psychological barriers to saving, then the real interest rate will ________ and the equilibrium quantity of saving and investment will ________.

Answer 1

decrease; increase

Step-by-step explanation:

The real interest rate is one that can generate real profits for an investor. This is because it generates gains above inflation. The real interest rate represents the return on your investments in practice. That is, it expresses better how much its patrimony has grown. In a situation where employers automatically enroll employees into savings programs to overcome psychological barriers to savings, the real interest rate will decrease and as a result the balance of savings and investment will increase.