History, Politics & Society
Banking
Economics
NASDAQ

Why are long term interest rates so important to the health of the economy?

Answer

User Avatar
Wiki User
March 13, 2013 9:17PM

Answer

Lower interest rates stimulate business investment by borrowing and also to greater consumer consumption which can be inflationary. Lower interest rates also tend to boast the stock market because higher returns are found there. When productivity costs are lower, which is a result of lower interest rates, business is more competitive internationally and can sell more products abroad and this leads to a stronger currency. Higher interest rates are deflationary and dampen consumer spending. Long term rates are important because business trives when there are fewer uncertainties. A strong business infrastructure is essential to th health of the economy crearting more jobs and more wealth.