Money, interest rates and income.

Relationship between money, interest rate (which represent the movement along the curve) and change in income (which represent the shift along the curve).
The first question we should ask our self, is what is interest rate and how does it relate with money.

Interest rate is the money that is paid by the borrowers, usually expressed as a percentage. Interest rate is paid to protect creditors against inflation and benefiting the creditor for risking their money by lending borrowers who might not return it.

Money and interest rate have a negative relationship because when the interest rate are high then amount of money available will be limited and people will borrow less and also spend less, and if the interest rate is lower the amount of money available will increase and people will borrow more and if they borrow more they will spend more, for example (if earning R1000 ) and you borrow R500 from a bank and promise to pay back while the interest rate of is 5%, after paying you will be left with R475 but if the bank decide to reduce the interest rate to 2% will be left with R490. These is called the movement along the curve.

The relationship between money, interest rate and income. Income and money have the positive relationship because if the income increases the amount of money available will also increase and if the income decreases the money available will also increase and the interest rate will remain the same, for example if you still borrow R500 and the interest rate is 5% but the interest rate increase by R1000. After you have settle your debt you be left with R1475 (R500X5%+R500 – R1000 + R1000(increase in income)). You will have more more money to spend despaire the interest rate. These is called the shift of the demand curve.
The calculation for movement along the curve are as follows:
For the interest rate of 5% will be letf with R475 to spend which is derived as:
R500*5%+R500 – R1000 (income)=R475
When the interest rate is reduced to 2% then then money letf after the settlement is R490.
R500*5%+R500 – R1000 (income)=R490