-
High rates of interest in a low inflation region
-
- attract people to make an investment
- discourage people to make an inverstment
- create atmosphere for capital formation
- are not favourable for credit expansion
Correct Option: A
Inflation reflects a situation where the demand for goods and services exceeds their supply in the economy. Higher interest rates in low inflation means higher real returns not just on money, but on all other assets too. These higher real returns increases the allocation of investment.