Briefly explain the Abstinence theory or waiting theory?

Question

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Answer

This theory was propounded by N.W.Senior.
According to Senior, capital is the result of saving.
Saving involves “abstinence” or “Sacrifice”
It is possible to save only if one abstains from present consumption.
Interest is the reward or compensation paid to the saver (capitalist) for his “abstinence” or “sacrifice”.
Marshall accepted the Abstinence theory of interest.
According to him, interest is a reward for waiting.
Saving involves waiting.
Therefore, interest is the reward paid to the saver for his “ waiting ”.

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