Hi all, I am a bit unclear about the interest being used in the macroeconomics part. Are we using a single interest for all or are interest on different things being used for different purposes? Illustrating, is the interest rate for AS model the same as the one used by the central bank to control bank liquidity by raising interest? Seems a bit mixed up! Thanks for helping! Regards, Shyam
In practice, these interest rates may be different and there might be a lot of interest rates out there (consider the bank base rate compared to the rate(s) earned on savings, the amount(s) paid on borrowing etc). However, these interest rates are likely to be strongly linked, so when one (the base rate) goes up, the others are likely to as well.
