The classical interest rate theory emphasizes the decisive role of investment and savings in interest rates, right?

Yes, the classical interest rate theory holds that interest rates are determined by savings and investment.

According to the classical interest rate theory, interest rate has the function of automatically adjusting the economy and balancing it: when savings exceed investment, interest rate drops, and people automatically reduce savings and increase investment; When savings are less than investment, interest rates rise, and people automatically reduce investment and increase savings.

1, the classical interest rate theory is a local equilibrium theory. Both savings and investment are functions of interest rate, and the function of interest rate is only to promote the balance between savings and investment.

2. According to the classical interest rate theory, savings are determined by factors such as "time preference"; Investment is determined by the marginal productivity of capital, interest rate has nothing to do with monetary factors, and interest rate is not affected by any monetary policy.

Therefore, in the view of classical interest rate school, monetary policy is invalid.

3. When the interest rate decreases, the possibility that the expected rate of return is greater than the interest rate increases, so the investment demand will also increase continuously, that is, the decreasing function of interest rate when investing. As long as there is a difference between the interest rate of money and the expected rate of return on investment, capital will flow between savings and investment.