1 Answers
How do changes in interest rates affect the economy?
Changes in interest rates can have a significant impact on the economy. When interest rates rise, borrowing becomes more expensive, leading to lower consumer spending and investment. This can slow down economic growth and decrease inflation. On the other hand, when interest rates are lowered, borrowing becomes cheaper, encouraging more spending and investment, which can stimulate economic activity and boost inflation.
Overall, the relationship between interest rates and the economy is complex and multifaceted, with various factors influencing the outcome.
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