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If your interest is high then the money remain with you will be low to support your need. On the contrary you will be left with more money if the interest rate is low.
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Why interest rate has no affect on the aggregate demand?
The interest rate does affect aggregate demand. As the interest rate falls, aggregate demand increases and vice-versa.
How do interest rates affect consumption?
Real interest rates influence the level of household consumption in a country. Consumption of durable goods is interest sensitive, since households will sometimes finance the purchase of "big ticket items" such as automobiles, household appliances, computers, televisions, and other goods through borrowing. Households will respond to higher real interest rates by decreasing their consumption of these non-essential items since it becomes more costly to borrow when interest rates rise.Real interest rates are determined by taking the nominal interest rate, which is the actual percentage charged by banks for a loan, and subtracting the rate of inflation. For instance, a nominal interest rate of 5% in a situation where unanticipated inflation is 2% equates to a real interest rate of 3%. Households consider the real rate of interest when deciding to purchase durable goods requiring financing.If inflation is anticipated, banks will charge higher nominal interest rates to borrowers and therefore anticipated inflation has little or no effect on the real interest rate and consumption. Nominal interest rates rise with anticipated inflation as banks must charge higher rates to maintain their profits, since inflation erodes the value of money and a borrower would be paying back money worth less than the money he borrowed if nominal rates were not increased. However, if there is unanticipated inflation, or inflation greater than the rate anticipated by banks and incorporated into the rate charged to borrowers, then this will reduce the real interest rate and induce households to spend on durable goods, since the opportunity cost of holding money (the inflation rate) increases while the opportunity cost of spending money (the nominal interest rate) remains the same.During periods of unanticipated inflation, the real interest rate falls and households are more likely to consume more at every level of disposable income. If there is unanticipated deflation (a decrease in the price level), then the real interest rate rises, and since households would now have to pay back their lending banks with money worth more than that borrowed, the incentive is to save more and decrease consumption. A rise in real interest rates caused by a decrease in the price level results in less consumption at each level of disposable income.
What are some financial variables that affect the price earnings ratio?
interest rate
How does inflation affect interest rates?
if an interest rate is high, it is likely that inflation is also high. Generally, one doesn't affect the other so much as measure the other.
How does interest rates affect people?
Interest rates affect the value of holding assets compared to the value of holding money (since putting your money in an investment or a bank account is the opportunity cost to holding it as money). When interest rates increase, it is more profitable to save money than before, so the savings rate (the rate at which people save money at) increases and consumption decreases. Additionally, the interest rate also affects the net present value of the capital stock, wages, and other inputs in production, so production changes with the interest rate. Therefore, the interest rates can affect consumption and production.
Why interest rate has no affect on the aggregate demand?
The interest rate does affect aggregate demand. As the interest rate falls, aggregate demand increases and vice-versa.
How interest rate affect the sa economy?
how interest rates affect the sa economy
How do interest rates affect consumption?
Real interest rates influence the level of household consumption in a country. Consumption of durable goods is interest sensitive, since households will sometimes finance the purchase of "big ticket items" such as automobiles, household appliances, computers, televisions, and other goods through borrowing. Households will respond to higher real interest rates by decreasing their consumption of these non-essential items since it becomes more costly to borrow when interest rates rise.Real interest rates are determined by taking the nominal interest rate, which is the actual percentage charged by banks for a loan, and subtracting the rate of inflation. For instance, a nominal interest rate of 5% in a situation where unanticipated inflation is 2% equates to a real interest rate of 3%. Households consider the real rate of interest when deciding to purchase durable goods requiring financing.If inflation is anticipated, banks will charge higher nominal interest rates to borrowers and therefore anticipated inflation has little or no effect on the real interest rate and consumption. Nominal interest rates rise with anticipated inflation as banks must charge higher rates to maintain their profits, since inflation erodes the value of money and a borrower would be paying back money worth less than the money he borrowed if nominal rates were not increased. However, if there is unanticipated inflation, or inflation greater than the rate anticipated by banks and incorporated into the rate charged to borrowers, then this will reduce the real interest rate and induce households to spend on durable goods, since the opportunity cost of holding money (the inflation rate) increases while the opportunity cost of spending money (the nominal interest rate) remains the same.During periods of unanticipated inflation, the real interest rate falls and households are more likely to consume more at every level of disposable income. If there is unanticipated deflation (a decrease in the price level), then the real interest rate rises, and since households would now have to pay back their lending banks with money worth more than that borrowed, the incentive is to save more and decrease consumption. A rise in real interest rates caused by a decrease in the price level results in less consumption at each level of disposable income.
Does your credit score affect the interest rate when you apply for home financing?
Your credit score can possibly affect your interest rate when you apply for home financing. If you have a low credit score, you are considered a higher risk to the bank, and therefore, they may raise your interest rate.
What are some financial variables that affect the price earnings ratio?
interest rate
What is the primary factor that will affect how much is earned in a saving account?
The interest rate.
What factors affect wealth of households?
too high inflation rate would decrease the purchasing power of the money in those unemploied people
How interest rate affect the value of us dollar?
its actually the other way around. the value of the us dollar effects interest rates. the lower the us dollar is worth, the lower the interest rate
How simple interest and compound interest affect investment exercises?
Compound interest gives you more, but at a low interest rate (less than 10%), the difference is negligible.
How does inflation affect interest rates?
if an interest rate is high, it is likely that inflation is also high. Generally, one doesn't affect the other so much as measure the other.
How does interest rates affect people?
Interest rates affect the value of holding assets compared to the value of holding money (since putting your money in an investment or a bank account is the opportunity cost to holding it as money). When interest rates increase, it is more profitable to save money than before, so the savings rate (the rate at which people save money at) increases and consumption decreases. Additionally, the interest rate also affects the net present value of the capital stock, wages, and other inputs in production, so production changes with the interest rate. Therefore, the interest rates can affect consumption and production.
How does the federal reserve reducing the interest rate affect the bond market?
The cost of borrowing money.^%
