What is the effect of the intrest rate on the economy?

Question

its for an 9th grade english paper

Answer 1

Two fold....lower interest rates means the bank's interest rate is lower. That means loans will be cheaper so people use that to make bigger purchases like houses, cars, business equipment, etc. Now, it also usually means that any interest bearing account like savings or money market is also low and hardly earning anything so people have less of an incentive to save. As the interest rate increases, loans get more expensive so there are less bigger purchases but the interest bearing accounts get a higher rate so there is more of an incentive to save.

Answer 2

well ,a high interest rate makes it more expensive to borrow money. When it cost more to borrow money then this affects the economy in many ways: 1 business need to cut spending so they freeze hiring or have lay offs.2 prices to make things go up so they pass that increase on to the consumers.3 If companies do hire they pay less.

Answer 3

An interest rate is the price of money. It has an effect like price changes on other commodities. As the price goes up, you can purchase (borrow) less. As the price goes down, you can purchase (borrow) more.
If rates are high, you might buy a cheaper car. If rates are low, you might buy a Lexus.

Answer 4

i cant give a thesis on the subject ... but i can tell u that it directly affects the "buisness cycle" ... the bankers "row" the economy with it so they can make more money ... when interest rates are low more people take out loans and money is more plentiful .. things look good ... then they tighten the interest rates .. raise them .. and money is harder to borrow and it is less plentiful and more people default on their loans and the bankers confiscate property lol ... in a nutshell ...

Answer 5

interest rates are generally used as a tool in order to control inflation. the more people spend the greater economic growth and the greater inflation, therefore high interest rates reduce inflation and economic growth while low interest rates increase economic growth and inflation

Answer 6

It drains my wallet...