Economics · Theories of Interest

According to the Classical theory of interest, interest is defined as:

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1Interest depends primarily on the marginal efficiency of capital and investment demand.
2Interest is fixed by the central bank policy and cannot fluctuate.
3Interest is the reward for saving, determined by the supply of and demand for loanable funds.✓
4Interest is determined by liquidity preference.

Correct answer

Interest is the reward for saving, determined by the supply of and demand for loanable funds.

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