f interest rates are rising in an economy, what might the relationship be between savings and investment that is causing this to

Question

Alexxandr [17]

3 years ago

11

f interest rates are rising in an economy, what might the relationship be between savings and investment that is causing this to

happen?

Business

1 answer:

aleksklad [387] · Answer 1 · 2022-07-24T23:30:00+03:00

Answer: b) Investment demand had been greater than savings

Explanation:

Investment in the economy comes from savings by households also known as Loanable funds. If investment demand is higher than the savings supply this demand will pull the interest rate up due to a lack of loanable funds.

As the interest rates are pulled up, more people will be encouraged to save their money in other to benefit from the higher interest rates thereby increasing the loanable funds in the market.