Question

Which of the following determine(s) the level of real interest rates? I) The supply of savings by households and business firms II) The demand for investment funds III) The government's net supply and/or demand for funds

Answer 1

I II & III - All of the above.

Step-by-step explanation:

Real interest rate is an interest rate that shows actual cost of funds to a borrower having taken into consideration the effects of inflation while also reflecting actual gain to the lender. It shows how purchasing power has value on interest paid on a loan.

With regards to the above, determinants of real interest rates are; the supply of savings by household and business firms, the demand for investment funds and the government's net supply/and or demand for funds.