Final answer:
The decline in real interest rates is primarily due to a lack of investment opportunities, a fall in demand for funds, and a rise in supply of funds in the financial market. Lower demand leads to less ability for lenders to charge higher rates, while higher supply increases competition among lenders, driving rates down.
Step-by-step explanation:
The decline in real interest rates in the world can be attributed to several factors. Notable among these is the lack of investment opportunities, which suggests that when there are fewer opportunities for profitable investments, the demand for borrowing decreases, leading to lower interest rates.
Another key factor is related to changes in the financial market, specifically, a fall in demand for funds and a rise in supply of funds. A decrease in the demand for loans means that borrowers are less inclined or able to take on new debt, prompting lenders to lower interest rates to attract customers.
Conversely, an increase in the supply of funds, perhaps due to an influx of savings, also contributes to lower interest rates as more lenders compete for the business of fewer borrowers.
Therefore, options b. A fall in demand and c. A rise in supply in the financial market are changes that will lead to a decline in interest rates. When demand falls, lenders cannot charge as much, and when the supply rises, competition for borrowers intensifies, pushing rates down.