Continued from the previous 3 questions, Consider the timeline: First there is no virus and Henry earns $50K this year and expects to earn $50K next year. Second, the lockdowns lower his income to $25k this year and he expects to earn $50K next year. Finally, Henry's expectation change and he earns $25K this year and expects to earn $25K next year. The interest rate is determined by the supply and demand for loanable funds. The supply is created by people who spend less than they earn, saving the unspent income and willing to lend that money in return for interest. The demand is created by people who want to spend more than they earn today and are willing to pay back money borrowed today plus interest with future expected income. If you are unclear about this relationship, you can watch Bond Prices and Interest Rates.mp4 Going from the first to the second point in the timeline, interest rates will [Select * because Select) and [ Select Going from the second to the final point in the timeline, interest rates will Select because [Select In the final scenario, the Permanent Income Hypothesis posits (Select]