(solution) † 4. One country is “stagnant” (i.e., has little investment and economic growth)

(solution) † 4. One country is “stagnant” (i.e., has little investment and economic growth)

† 4. One country is “stagnant” (i.e., has little investment and economic growth) because productive opportunities yielding a good return on investment are lacking. Another “stagnant” country has excellent investment opportunities, but has little investment because the citizens’ time-preferences are very high. Which country would tend to have a high, and which a low, real interest rate? Explain.