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Key Economic Indicators (Economic growth/National income (GDP - Gross…
Key Economic Indicators
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Do I know the impact of low rates on -people, government , Business
Business-Low interests rates make it much more beneficial for you to take out new loans to invest in the expansion of your business. Locking in a lower interest rate means your loan will cost you less in the long run.
People-This means banks lose deposits. ... Low interest rates also negatively affect people who live off the interest income from their savings, so they cut back their spending. When a large group of people, such as baby boomer retirees, reduce their spending, overall economic activity slows.
Government -Changing the federal funds rate influences the money supply, beginning with banks and eventually trickling down to consumers. The Fed lowers interest rates in order to stimulate economic growth. ... However, when rates are too low, they can spur excessive growth and perhaps inflation.
Do I know the impact of high rates on -people, government, business
People- Increases the cost of borrowing. With higher interest rates, interest payments on credit cards and loans are more expensive. Therefore this discourages people from borrowing and spending.
Government-Higher interest rates increase the cost of government interest payments. This could lead to higher taxes in the future. Reduced confidence. Interest rates affect consumer and business confidence.
Business-An increase in interest rates can affect a business in two ways: Customers with debts have less income to spend because they are paying more interest to lenders. Sales fall as a result. Firms with overdrafts will have higher costs because they must now pay more interest.