Final answer:
Classical economists hold that when interest rates are flexible, saving will equal investment, option A, due to the interest rate's role in balancing savings and investments. These economists focus on rates of return, risks, and the elasticity of savings, which influence shifts in the supply curve for financial capital.
Step-by-step explanation:
According to classical economists, when interest rates are flexible, they posit that saving will equal investment, option A, as interest rate adjustments ensure that the money supplied for saving meets the demand for investments. They argue that an equilibrium is achieved where supply and demand intersect, so the levels of savings and investment in an economy balance out.
When analyzing different forms of financial investments, suppliers of financial capital must heed the rates of return and the risks involved. If a particular investment becomes riskier or the return decreases, the supply curve of financial capital for that investment will shift. Conversely, investments that are perceived as having better returns or lower risks will attract more savings, leading to a rightward shift in their supply curve of capital.
In markets for financial capital, the elasticity of savings indicates how sensitive savings are to changes in interest rates, and this elasticity shapes the supply curve for financial capital. Ultimately, this interconnectedness of risk, return, and interest rates underpins the classical economics' perspective that saving will equal investment when interest rates are left to adjust freely.