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Interest rates are positive mainly because people tend to prefer the future to the present. of...

Interest rates are positive mainly because

people tend to prefer the future to the present.

of inflation.

bankers are greedy.

people tend to prefer the present to the future.
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Answer #1

Interest rates are positive mainly because of inflation

Inflation is the sustained increase in the general price level of goods and services in an economy during a specified period of time. When inflation rises, each unit of currency buys fewer goods and services over a period of time. Money performs the function of store of value. This value gets eroded gradually over a period of time and results in fall in the purchasing power of the currency. To protect against the continuing fall in value of currency or money the individuals always aims to invest or save the money so as to earn positive interest rate to hedge against inflation.

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