Four fundamental factors affect the supply of, and demand for, investment capital, hence the of money. These factors are: production opportunities, time preferences for consumption, risk, and inflation. If the entire population was living at the subsistence level, time preference for current consumption would be , savings would be - Seiect. 0 , interest rates would be , and capital formation would be Producers' expected retums on their business investments set a( (n) limit on how much they can pay for savings, while consume time preferences for consumption estabilish how much consumption they are willing to delay, and, consequently, how much they will different interest rates. In addition, risk and inflation lead to higher interest rates. Determine whether each of the statements below is true or false: Government policy doesn't influence the allocation of capital and the level of interest rates The supply curve in each market is upward sloping, which indicates that investors are willing to supply more capital the higher the interest rate they receive on their copital. The interest rate in each market is the point where the supply and demand curves for capital intersect. There is a price for each type of capital; however, the price remains constant due to foreign investment. Complete the following statements: If the Federal Reserve tightens credi, which decreases the supply of funds, interest rates If the demand for funds decline, which trpically happens during a recession, intereit rates