Interest rates perform the function of

Question

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Interest rates play a key role in allocating funds, which in turn affects the allocation of physical capital. By setting the cost of borrowing, interest rates influence investment decisions and signal the relative attractiveness of investing in different industries or sectors. This, in turn, affects the allocation of resources in the economy. While interest rates may also signal information about the inflation rate (A) and reward savers (D), their primary function is to allocate funds and determine the allocation of physical capital (C). Interest rates also affect both the consumer and business sectors, not just the consumer sector (B).

Interest Rates Perform the Function of