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What is Hotelling’s rule? Include an explanation of how a change in the interest rate will...

What is Hotelling’s rule? Include an explanation of how a change in the interest rate will affect the price of a resource over time.

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ans:  Hotelling's rule defines the net price path as a function of time while maximizing economic rent in the time of fully extracting a non-renewable natural resource. The maximum rent is also known as Hotelling rent or scarcity rent and is the maximum rent that could be obtained while emptying the stock resource.

This means that money demand exceeds money supply and the actual interest rate is lower than the new equilibrium rate. ... Thus an increase in the price level (i.e., inflation) will cause an increase in average interest rates in an economy.

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