In Fisher's terms, the interest rate reflects the interaction of the savers' marginal productivity of capital and borrowers' marginal rate of time preference.

Question

Quizplus · Accepted Answer

Fisher's theory primarily states that the interest rate is determined by the supply and demand for funds, particularly focusing on the interplay between the lenders' rate of time preference for current versus future consumption and the borrowers' productivity of investment or the rate of return on investments.

In Fisher's Terms, the Interest Rate Reflects the Interaction of the Savers