Question

Suppose a new process was developed that could be used to make oil out of seawater. The equipment required is quite expensive, but it would in time lead to low prices for gasoline, electricity, and other types of energy. What effect would this have on interest rates

Answer 1

Answer:

Interest rate will be higher

Explanation:

• Funds invested in such opportunity will attract higher payoff,because only higher interest rate can be paid to attract such funds.

• Fewer people are ready to safe because they needed to consume their money in the purchase of expensive gasoline.

• The investment risk is higher because the returns are higher and that is what all investors look out for.