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What are the 5 theories of interest?

The five theories of interest are as follows: 1. Productivity Theory 2. Abstinence or Waiting Theory 3. Austrian or Agio Theory 4. Classical or Real Theory 5. Loanable Fund Theory. 1. Productivity Theory: According to productivity theory, interest can be defined as a reward for availing the services of capital for the production purpose.

What is the theory of interest?

Theory of Interest # 1. Productivity Theory of Interest: This theory of Interest was expounded by J. B. Clark and F. H. Knight. Further Marshall, J. B. Say, Von-Thunen supported this theory. According to this theory interest arises on account of the productivity of capital.

What is the classical theory of interest?

The supply of capital is governed by thrift (i.e. saving) or time preference and the demand for capital is influenced by the productivity of capital. The classical theory of interest is based upon the following assumptions: (i) Perfect competition exists in the factor market. This assumption has the following implications:

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