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Manipulating interest rates have historically been used by the Federal Reserve Bank(Fed) in attempts to stabalize the nation's economy for many, many years. When the economy is growing, the Fed raises short term interest rates to slow down inflation. Invesly, when the economy goes bust, they lower the interest rates to spur lending, investment, and consumer spending. However, our latest, and convincingly most dramatic recession is spawning new challenges for the Feds. One such side-effect of this global financial crisis is frozen credit - the balance sheets of banks are simply too congested and no one is willing to lend money to each other. Is this respect, Fed chairman Ben Bernanke's recent near-zero interest rates have failed to encrouage banks to lend to businesses, invidivuals, and other banks - there's simply no certainty that anyone will be paid back. In the past however, as recently as the begining of this century, former Fed chairman Alan Greenspan attempts at spurring the economy through low interest rates(after the dot-com crash of 2000) HAVE succeded as evidenced by the housing boom(2002-2007). The housing boom is responsible for subprime lending - the heart of the financial crisis and credit freeze we're now experiencing. Low interest rates won't work this time, so go fish, Bernanke!
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If the country is in a recession what will the government do to the interest rates to stimulate the economy?
lower
What is the significance of interest Rates for an economy?
the significance is that the government profit from specific interest rates in an economy
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 is a fiscal policy tool used to stimulate the economy Reducing inefficient employment of resources Lower interest rates Increased imports Increased government purchases?
increased government purchases.
How can open market operations expand the economy?
An open market policy can be used to stimulate the economic activity by increasing the money supply, lowering the interest rates and the change in reserve banks.
If the country is in a recession what will the government do to the interest rates to stimulate the economy?
lower
What is the significance of interest Rates for an economy?
the significance is that the government profit from specific interest rates in an economy
How have the interest rates changed over the past five years?
Interest rates have decreased over the past five years. In fact, they are now at record lows. The Fed has lowered the rate several times to try to stimulate the slugging economy.
How interest rate affect the sa economy?
how interest rates affect the sa economy
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 is a fiscal policy tool used to stimulate the economy Reducing inefficient employment of resources Lower interest rates Increased imports Increased government purchases?
increased government purchases.
How can open market operations expand the economy?
An open market policy can be used to stimulate the economic activity by increasing the money supply, lowering the interest rates and the change in reserve banks.
Why are treasury rates so low?
Yes in fact it is to help the economy in a way. The treasury rates are so low in order to encourage more spending and in theory stimulate the economy.
Why might rising interest rates depress stock prices?
rising interest rates usually means the economy has less
What tools are often used by the Federal Reserve to stimulate borrowing and spending?
Some of the tools used by the Federal Reserve to stimulate borrowing and spending include changing of bank rates and altering the interest rates on treasury bills. Treasury bills with high interest rates encourage people to save.
Why are long term interest rates so important to the health of the economy?
AnswerLower 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.
How beneficial are CD interest rates?
What is beneficial about CD interest rates is that they are constant for the specified period of time. Sometimes interest rates can go up or down but CD interest rates would stay the same.
