S
Scotty
Member
Hi there,
I need something clarified for me as I believe contradicts itself on several occasions....
When interest rates increase, should consumer spending increase or decrease, should investments increase or decrease and should borrowing increase or decrease?
What I believe is that it depends on future expectations of economic growth and future inflation but sometimes in the notes it will say one and sometimes the other.
For example in one place it says "interest rates increasing will cause consumer spending & investments to decrease"....makes sense as there is a lower opportunity cost in saving now. However I've also seen it say that "a decrease in interest rates will mean consumers will save more"...as they need to save more to earn the same interest.
I think I've seen something similar with the money supply and interest rates too.
Help please.
Scotty
I need something clarified for me as I believe contradicts itself on several occasions....
When interest rates increase, should consumer spending increase or decrease, should investments increase or decrease and should borrowing increase or decrease?
What I believe is that it depends on future expectations of economic growth and future inflation but sometimes in the notes it will say one and sometimes the other.
For example in one place it says "interest rates increasing will cause consumer spending & investments to decrease"....makes sense as there is a lower opportunity cost in saving now. However I've also seen it say that "a decrease in interest rates will mean consumers will save more"...as they need to save more to earn the same interest.
I think I've seen something similar with the money supply and interest rates too.
Help please.
Scotty