Discover the best answers at Westonci.ca, where experts share their insights and knowledge with you. Join our Q&A platform to connect with experts dedicated to providing accurate answers to your questions in various fields. Connect with a community of professionals ready to provide precise solutions to your questions quickly and accurately.
Sagot :
A change in interest rates is one way to make that correspondence happen. A fall in interest rates increases the amount of money people wish to hold, while a rise in interest rates decreases that amount. A change in prices is another way to make the money supply equal the amount demanded.
Answer:
The monetary authorities affect interest rates, which have a direct impact on the money supply in the economy. When the Fed reduces interest rates, industries and businesses borrow more money because their interest expense reduces. They can borrow money at a lower interest rate. When businesses invest money in new projects, they create more jobs, which reduces unemployment. Thus, people earn more money and their disposable income increases, which increases consumer spending. Additionally, because of increased output, there are more products and services on the market for consumers to buy. The increase in demand could drive up the prices of goods and services.
When interest rates are high, businesses have to pay higher interest rates on loans. They borrow less money, which can lead to economic stagnation due to a paucity of new investments and higher unemployment. As unemployment increases, the spending capacity of people decreases, which can further stunt growth because there is less money in the economy. Thus, interest rates have a huge and direct effect on the money supply in the economy.Explanation:
Thank you for trusting us with your questions. We're here to help you find accurate answers quickly and efficiently. Thanks for using our platform. We aim to provide accurate and up-to-date answers to all your queries. Come back soon. We're glad you visited Westonci.ca. Return anytime for updated answers from our knowledgeable team.
