Final answer:
Other determinants of the real interest rate include central bank policies, government fiscal decisions, and supply and demand shocks in financial markets. Government borrowing and foreign investment sentiments can shift demand for financial capital, affecting equilibrium interest rates.
Step-by-step explanation:
When the real interest rate does not adjust to equilibrate saving and investment, there are other factors that can determine the real interest rate in the economy. These factors could include monetary policy set by the central bank, fiscal policy decisions by the government, and various supply and demand shocks that might affect the financial markets. For example, if the government increases its borrowing, this can shift the demand curve for financial capital, leading to changes in the equilibrium interest rate and equilibrium quantity of investment, as seen in the theoretical models.
An increase in government borrowing tends to shift the demand curve for financial capital to the right, resulting in a higher equilibrium interest rate. Likewise, changes in foreign investment demand due to investor confidence or global economic conditions can also alter the interest rate, leading to a new equilibrium.