11 Jun Principles Of Macroeconomics
Currently the Federal Reserve is gradually raising interest rates. What challenges come with doing that in an economically healthy way? If they were lowering rates, what challenges would come with that?
Along with contributing your own answer by Friday, contribute thorough, thoughtful responses to at least two classmates by Tuesday.
ALSO PLEASE REPLY TO ANOTHER STUDENTS COMMENT BELOW
VALERIE:
When the Fed raises interest rates it tends to reduce consumer spending and investing. As interest rates rise, the cost of borrowing increases for purchases like a car, a home, and college tuition. Companies will also pay more for their debt. When companies pay more for their debt they don’t have that cash to pay workers or buy more inventory and this effects the job market and slows the economy. Even small increases in interest rates could lead to hundreds of billions of dollars more in debt costs over time, therefore a higher interest rates creates a higher US debt burden for taxpayers. Even small increases in interest rates could lead to hundreds of billions of dollars more in debt costs over time. While lower interest rates will spur the economy by making corporate and consumer borrowing easier, if rapid growth of the economy happens this can create problems with demand racing ahead of aggregate supply which can cause a rise in prices.
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