Question

Explain how change in the interest rate and inflation might affect saving and investment decision in the economy?

Answer 1

Interest rate is directly proportional to savings because if the interest rates are high savings are high and if interest rates are low then savings are low.

Inflation is inversely proportional to savings because if inflation is high then there will be less savings and if inflation is low means there are more savings.

Interest rates are inversely proportional to Investment because if interest rates are higher then there will be less Investment and Vice-versa.

Inflation and Investments are also inversely proportional because if there is high inflation then investments will decrease. and Vice-versa.