0
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!
What else can I help you with?
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 will the changes in the interest rate impact the economy?
Changes in the interest rate can impact the economy in several ways. When interest rates are lowered, it can stimulate borrowing and spending, which can boost economic growth. On the other hand, when interest rates are raised, it can slow down borrowing and spending, which may lead to a decrease in economic activity. Overall, the impact of interest rate changes on the economy depends on various factors such as the current economic conditions and the reasons behind the rate adjustments.
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 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
How will the changes in the interest rate impact the economy?
Changes in the interest rate can impact the economy in several ways. When interest rates are lowered, it can stimulate borrowing and spending, which can boost economic growth. On the other hand, when interest rates are raised, it can slow down borrowing and spending, which may lead to a decrease in economic activity. Overall, the impact of interest rate changes on the economy depends on various factors such as the current economic conditions and the reasons behind the rate adjustments.
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 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.
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.
If Central wants to achieve lower nominal interest rates it has to raise the nominal interest rates.?
The statement is contradictory; if a central bank wants to achieve lower nominal interest rates, it should lower its policy interest rates rather than raise them. By decreasing rates, the central bank can stimulate borrowing and spending, which can help lower overall nominal interest rates in the economy. Raising nominal interest rates would typically tighten monetary policy and could lead to higher borrowing costs. Therefore, to achieve lower nominal interest rates, the central bank should take actions that promote lower rates, not raise them.
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 is he relationship between GDP inflation and interests rates?
The relationship between GDP, inflation, and interest rates is interconnected in macroeconomic theory. When GDP grows, it can lead to increased demand for goods and services, potentially causing inflation to rise. Central banks often respond to rising inflation by increasing interest rates to cool the economy and maintain price stability. Conversely, lower interest rates can stimulate economic growth, potentially leading to higher GDP but also risking inflation if the economy overheats.
