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Interest rates can be thought of as the cost of money. Therefore assuming a fixed amount of money in the economy, if the price level increases, real income decreases and consequently money may have to be borrowed in order to maintain real income. But because there's a fixed amount of money in the economy there will be more demand for money than there'd be supply of. In essence, the increase in the price level, increases the demand of money and also the price of money which, coincidently, is the interest rate.
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Is the price at which bonds sell determined by the interaction of stated rates of interest and market rates of interest?
Yes, the price at which bonds sell are determined by the interaction of stated rates of interest and market rates of interest.
What factors that affects the demand for money?
The major factors that affect the demand for money are price level, interest rates, economy, and the price of money.
Do interest rates rise when inflation declines?
Interest rates are simply the price of money. When inflation declines, interest rates typically decline also.
What is different about interest rates or price credit from other prices in the economy?
what is different about interest rates, or price of credit, from other prices in the economy
How does a expansionary monetary policy affect the interest rate overall price level and GDP?
expansionary monetary policy increases money supply by lowering interest rates
Is the price at which bonds sell determined by the interaction of stated rates of interest and market rates of interest?
Yes, the price at which bonds sell are determined by the interaction of stated rates of interest and market rates of interest.
What factors that affects the demand for money?
The major factors that affect the demand for money are price level, interest rates, economy, and the price of money.
Do interest rates rise when inflation declines?
Interest rates are simply the price of money. When inflation declines, interest rates typically decline also.
What is different about interest rates or price credit from other prices in the economy?
what is different about interest rates, or price of credit, from other prices in the economy
What does higher interest rates in mortgage lead to?
Higher mortgage interest rates inherently reduces the public demand for mortgages since price level has an inverse relationship with demand. Ceteris paribus (all other things remaining equal) the interest rate will return to the rate at which the both the price level and quantity of mortgages taken will achieve maximum values.
How does a expansionary monetary policy affect the interest rate overall price level and GDP?
expansionary monetary policy increases money supply by lowering interest rates
Explain why an expectation of Central Bank official rate hikes would cause bond price to fall?
The price of bonds is inversely related to interest rates. If interest rates rise, the value of existing bonds will decline since the coupon rate available on newly issued debt will be higher due to the increase in interest rates. The price of existing bonds will drop in price until the bond provides a yield similar to comparable newly issued debt.
How does bankruptcy affect interest rates on loans and credit cards?
It cause interest rates to rise.
What is the correlation between the price of gold and interest rates?
The correlation between the price of gold and interest rates can be a bit complicated. If there is a higher yield of gold in a year, the interest rates and price tend to lessen; the more gold there is, the easier it is to acquire. If other investments offer increasing returns, gold prices and rates will tend to lower.
Bond prices and interest rates are directly or positively related?
The price is inversely related to yields (interest rates). This means as rates rise, prices fall.
Are Bond prices and interest rates are directly or positively related?
The price is inversely related to yields (interest rates). This means as rates rise, prices fall.
If expected inflation increases interest rates are likely to increase?
Yes, inflation and increases in interest rates usually go hand-in-hand, though inflation is not the sole cause of an increase in interest rates
