In the Classical view of the credit market, an increase in saving will lead to a decline in the and to an increase in investment. Saving is the difference between disposable income and . Classical economists assume that that prices and wages are . If Real GDP is less than Natural Real GDP, the economy is in a (an) gap. If Real GDP is greater than Natural Real GDP, the economy is in a (an) gap. When the economy is in a recessionary gap, the unemployment rate is than the natural unemployment rate. When the economy is in an inflationary gap, the unemployment rate is than the unemployment rate.

Explanation:

In the Classical view of the credit market, an increase in saving will lead to a decline in the interest rate and to an increase in investment. Saving is the difference between disposable income and consumption. Classical economists assume that that prices and wages are flexible. If Real GDP is less than Natural Real GDP, the economy is in a recessionary gap. If Real GDP is greater than Natural Real GDP, the economy is in a inflationary gap. When the economy is in a recessionary gap, the unemployment rate is greater than the natural unemployment rate. When the economy is in an inflationary gap, the unemployment rate is less than the unemployment rate.

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