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What is the relationship between interest rate exchange rate and inflation?
Wiki User
∙ 13y ago
interest rate can be seen as the price of a currency, if it goes up, then the value of investment would rise as well, thus making this currency more desirable comparing to others, leading to an appreciation.
in terms of inflation, interest rate is also the price at which investor pay for their loans, so if the interest rate is low, let's say 0, then investors can get their loans at no cost, then loads of loans will be made, leading to more investment, more investment means better company revenue in theory, so higher income, higher price level
Wiki User
∙ 13y ago
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What is the relationship between CPI and inflation?
CPI is the indicator of inflation in any country.If CPI is high it means inflation is high.
Describe and give reasons for the relationship that exists between RGDP inflation and umeployment?
It is an inverse relationship. As inflation increases, unemployment decreases. This can be shown by the Phillips curve
What is the relationship between inflation and deflation and the Cross of Gold speech?
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What is the Phillips curve?
In economics it's the inverse relationship between inflation and unemployment.
What is the relationship between Interest rate parity with exchange rate?
Exchange rate is the rate at which one country's currency is changed for another country's currency. For example the rate at which one dollar can be changed for pound sterling or any other currency.
What is relationship between inflation and recession?
The relationship between inflation and recession is that a recession will cause inflation to go down. The reason for this is due to their being less money being spent due to the recession.
What is the relationship between CPI and inflation?
CPI is the indicator of inflation in any country.If CPI is high it means inflation is high.
Describe and give reasons for the relationship that exists between RGDP inflation and umeployment?
It is an inverse relationship. As inflation increases, unemployment decreases. This can be shown by the Phillips curve
What is the relationship between inflation and deflation and Cross of Gold speech?
Help me
What is the relationship between inflation and deflation and the Cross of Gold speech?
Help me
Why do money exchange rates change frequently?
Money exchange rates change frequently because finances around the world also change frequently. There are six things that determine exchange rates which are interest rates, inflation, account deficits between countries, public debt, terms of trade between countries, and political and economical stability. As these things fluctuate, exchange rates fluctuate.
Is there any relationship between issue of plastic currency and inflation?
lolz, no no0b.
What is the Phillips curve?
In economics it's the inverse relationship between inflation and unemployment.
What does a lower interest rate mean for savers?
It means that they are getting less money for deferring expenditure and saving instead. However, it is not the low nominal interest rates which matter but what the "real" interest rates are. This is the difference between the nominal interest rate and the rate of inflation. An interest rate of 2% when inflation is 0% is good news for savers but an inflation rate even as high as 10% is bad news if inflation is higher than 10%.
What is the relationship between inflation and interest rates?
Interest and inflation are related in one, main way, and that is through the fluctuation of available money. If the Fed decides that they are going to produce more paper money, then the average person will have more purchasing power, thus spend more on things they wouldn't normally. Because of the increase in money, in order to keep up businesses raise prices, thus causing inflation. Interest comes in to play because when inflation occurs, lenders want more money to be able to keep up with inflation. Because of this, they raise their interest prices to gain more money on their return. ***when the inflation rate rises, so does the items, including money barrowed by individuals or companies.
What is the relationship between interest rate and labor supply?
There is not a direct link but high interest rates are associated with expectations of high rates of inflation. High inflation may be associated with high wage rises and so lower employment rates. Low employment rates would suggest excess labour supply. So, from one end of that chain to the other: high interest rates are associated with high labour supply.
How does inflation help explain why banks charge interests on loans?
If I understand you correctly, you want to know the relationship between interest rates and inflation. There are many factors that go into these decisions, but to keep it simple, when inflation is higher than desired, the Federal Reserve will raise interest rates. Higher interest rates decrease the amount of borrowing and increase the amount of savings. This decreases the monetary supply, and less money flowing through the economy will decrease the inflation rate. All you really have to understand is inflation. If everyone acquires too much money, that money will be worth less than it was in the past, thereby causing retailers, etc. to raise prices.
