Answer the following question:

• 1. The relevance of saving and investment for interest rate determination under a fiat money system.
  • Explain why the cash rate as determined by the central bank functions as the anchor rate for all interest rates.
  • Explain the degree to which saving and investment may influence longer rates
• 2. The potential contribution of the interest rate mechanism towards the maintenance of macroeconomic stability .
  • Explain the nature and relevance of the natural interest rate concept.