Question: 1. How would you expect an increase in the propensity to save to affect the general level of interest rates in an economy? 2. Explain

1. How would you expect an increase in the propensity to save to affect the general level of interest rates in an economy?

2. Explain how an increase in the rate of inflation might affect : (a) real interest rates , (b) nominal interest rates !

3. Why are some lenders capital risk averse and others income risk averse? What slope will the yield curve have when the market is dominated by capital risk aversion?

(use your own words)

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