Four fundamental factors affect the supply of and demand for, investment capital, hence the (amount/cost/desirability) 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 preferences for current consumption would be (high/low), savings would be (high/low), interest rates would be (high/low), and capital formation would be (easy/difficult). Producers' expected returns on their business investments set a(n) (lower/upper) limit on how much they can pay for savings, while consumers' time preferences for consumption establish how much consumption they are willing to delay, and, consequently, how much they will (spend/save) at different interest rates. In addition, (high/low) risk and (high/low) inflation lead to higher interest rates.

Four fundamental factors affect the supply of and demand for, investment capital, hence the cost 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 preferences for current consumption would be high, savings would be low, interest rates would be high, and capital formation would be difficult. Producers' expected returns on their business investments set an upper limit on how much they can pay for savings, while consumers' time preferences for consumption establish how much consumption they are willing to delay, and, consequently, how much they will save at different interest rates. In addition, high risk and high inflation lead to higher interest rates.