... different than the real interest rate nowadays In other words, the increase in purchasing power received by lenders (the 69 70 CHAPTER real interest rate) in the 1980s was about the same as the increase... what otherwise would have been the case, the decrease in government expenditure lowers the real interest rate and increases investment b The stronger the Ricardo-Barro effect, the less the increase... that they would in the absence of the Ricardo-Barro effect The turmoil in financial markets leads some people to decrease their saving because of fear that they might lose these funds due to the