Session 14, book 5 says that “As risk aversion drops, the neutral rate should rise” (page 41). But as risk aversion drops, savers are more willing to lend money, so the interest should go DOWN??? Can someone explain?
Session 14, book 5 says that “As risk aversion drops, the neutral rate should rise” (page 41). But as risk aversion drops, savers are more willing to lend money, so the interest should go DOWN??? Can someone explain?