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Explain whether the following statement is true, false, or uncertain. Be explicit about your assumptions. Support...

Explain whether the following statement is true, false, or uncertain. Be explicit about your assumptions. Support your answer by a graph. ”If a person is a lender and the interest rate rises, he or she will remain a lender.”

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Answer #1

Correct Answer:

True

Explanation:

When interest rate increases, then more money comes to the economy for investments and real value of the money, increases. It puts a lender to be in a favourable position, because real value of money repaid by the borrowers, will be more than the real value of money given to them by the lender. So, there is an increased level of benefit to the lender. Further, real interest rate will also increase with the increase in interest rate. Hence, the given statement is true.

(There is a no need of the diagram for this question)

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