Interest rates

Question:

World real interest rates rose by about 1/2 % from the time of the Pharaohs till the 1950s. Since then, they have risen by about 4%. Why do you think this has happened?

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Answer: This is a perplexing question with a relatively simple answer. In the last four decades, the demand for money has risen due to a large number of entrepreneurial endeavors, corporate mergers and acquisitions, and global expansion of businesses. The world money supply, however, has not kept pace with this. As a result, the interest rates (the “price” of money) have gone up.

 

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