Interest is paid because

The correct answer is: A. Capital is scarce.

Interest is a payment made by a borrower to a lender for the use of borrowed money. It is a form of compensation for the lender’s risk and for the opportunity cost of the money that could have been invested elsewhere.

Capital is scarce because it is limited in supply. There is only a finite amount of capital in the world, and it is constantly being used up. This means that there is always a demand for capital, and those who have it can charge a premium for its use.

The other options are not correct because:

• Capital is productive, but this is not the reason why interest is paid. Interest is paid because capital is scarce, not because it is productive.
• Capital is attractive, but this is not the reason why interest is paid. Interest is paid because capital is scarce, not because it is attractive.
• Capital is surplus, but this is not the reason why interest is paid. Interest is paid because capital is scarce, not because it is surplus.