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How have interest rates changed over the last thirty years? What affects have these had on the economy and why?
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| Submitted: Thu Jul 11 2002
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1. 2. How have interest rates changed over the last thirty years? What affects have these had on the economy and why? Contents 1. INTRODUCTION 2 2. BACKGROUND 3 WHAT IS THE INTEREST RATE 3 WHAT IS THE AIM OF THE INTEREST RATE 3 Monetary policy 3 This is the transmission mechanism - or the economic route map between changing interest rates and inflation 4 3. THE ECONOMICS OF INTEREST RATES 5 WHY DOES A CHANGE IN THE INTEREST RATES AFFECT THE ECONOMY? 5 HOW INTEREST RATES AFFECT AGGREGATE DEMAND? 5 A FEW OF THE AFFECTS THAT INTEREST RATES HAS ON THE ECONOMY 7 Housing Rates 7 Credit Card and Loan Rates 8 Spending and saving 8 Marginal efficiency of capital 9 Exchange rates 9 Balance of Payments 9 HOW INTEREST RATES AFFECT ECONOMIC INDICATORS 11 GDP 11 INFLATION 12 ECONOMIC GROWTH AND JOBS 14 UNEMPLOYMENT 15 PHILLIPS CURVE 17 Graphs to show the idea of the Phillips curve 17 4. SUMMARY AND CONCLUSION 19 5. HOW THE CENTRAL BANK CAN CHANGE INTEREST RATES 21 IS CURVE 21 LM CURVE 22 6. BIBLIOGRAPHY 23 3. Introduction In this investigation I will set out to answer these two questions. How have interest rates changed over the last ten years? What affects have these changes had on...
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