The prime minister of Malaysia annouces in a press conference that he will fight the higher inflation rate with a new anti-inflation progra. Predict wht will happen to interest rates ig the public believes him.
2006-11-14 03:03:29 · 5 answers · asked by Agnes 1 in Social Science ➔ Economics
Interest rates may rise. (Money supply may contract too.)
2006-11-14 03:06:13 · answer #1 · answered by fastfrank7 5 · 0⤊ 0⤋
Interest rates will fall. This is a trick question and the answer is hidden in "the public believes him" part. This belief refers to a fall in expected inflation, which influences interest rates. In many developing countries like Malaysia, with the application of disinflation programs, interest rates fell. The reason is that, the belief that inflation will fall and the country will have a more stable economic environment, reduces the risk premium (because the expected inflation fell) and attract investors.
2006-11-14 05:05:21 · answer #2 · answered by daniel_cohadier 3 · 0⤊ 0⤋
i think of it particularly is taken under consideration necessary simplify this as much as conceivable. think of no government. once you're a banker and assume inflation, you will incorporate that into what you value. So, in case you have been going to cost 3%, and you think of inflation would be 3%, you will value 6%. for this reason, there's a fabulous relation between inflation and interest fee. Now, think of an financial gadget with a central authority. the government easily tries to cut back inflation via charging banks for in one day loans it holds (the decrease fee fee, it particularly is a type of interest fee) or via merchandising bonds (which reduces the indoors maximum money furnish). after all, a banker will ought to incorporate this value if it loans money and for this reason enhance the money it expenditures for loans. So, you ought to argue that this coverage will bring about a fabulous correlation with inflation. even though it gets to be very complicated with the aid of fact the severe expenses cut back output, and government could replace its coverage at any time.
2016-10-03 23:05:57 · answer #3 · answered by lavinia 4 · 0⤊ 0⤋
Haa with BLR at 6.75%, utililties bills increase, petrol + gas price increase, please do not even dream that inflation can be stopped. Don't forget the toll is also scheduled to increase in year 2007. Oh yes, the GST too at the middle of next year. There is no way inflation can be stop. Malaysians should just save money and avoid spending unnecessaryly.
2006-11-16 22:03:22 · answer #4 · answered by dranagar 5 · 0⤊ 0⤋
To fight inflation they raise the interest rates
2006-11-14 03:05:51 · answer #5 · answered by slippped 7 · 0⤊ 0⤋
What's the program he announced?
2006-11-14 03:06:18 · answer #6 · answered by Brite Tiger 6 · 0⤊ 1⤋