which situation most likely results when the government raises interest rates to banks course hero

The Central Bank usually increase interest rates when inflation is predicted to rise above their inflation target. Higher interest rates tend to moderate economic growth. Higher interest rates increase the cost of borrowing, reduce disposable income and therefore limit the growth in consumer spending.

Full Answer

What happens when the Federal Reserve decreases the discount rate?

May 15, 2017 · Which situation most likely results when the government raises interest rates to Banks? Economic activity slows. Which type of interest group would most likely be concerned …

Why does the real interest rate need to be high?

a lower money supply . Higher interest rates is caused by the lower money supply in the system. When the government lowers the money supply, it shifts the LM curve backward, increasing the …

How does the Federal Reserve determine very short term interest rates?

B. The rate of savings is quite low. C. Inflation is rising rapidly. D. The level of investment is quite high. A. In an effort to maintain price stability, it is expected that the European Central Bank will …

Why were high inflation rates associated with high nominal interest rates?

If the Fed wants to increase interest rates, it should make an _____. ... as a result, interest rates in the economy. a. When the Federal Reserve increases the discount rate, banks will borrow: ...

Answer

When the government lowers the interest rates, there is generally (and this is hoped for as well) an increase in the amount of credit available and used in the marketplace. The general hope is that the public will use the lower interest rates to buy, build, and spend.

New questions in History

In what ways was emancipation gendered during the American Revolution? In depth answer please

Why does the European economy expand?

This causes: an increase in aggregate demand, shifting the aggregate demand curve to the right. The government decides to decrease the amount it spends on the military.

Why is the aggregate supply curve vertical?

The long-run aggregate supply curve is vertical because: all input prices are flexible in the long run. Money is: anything that both buyers and sellers will accept in exchange for goods and services.

What is real balance effect?

a. In order to reduce the deficit, the government decides to increase the level of taxes in the economy. This causes: a decrease in aggregate demand, shifting the aggregate demand curve to the left.

What is the effect of an increase in the price level?

a. As a result of an increase in the price level, the cost of borrowing increases, which causes people to buy fewer cars. Interest-rate effect. When the price level decreases, restaurants become busier as more people purchase restaurant meals. Real-balances effect.

When is money used as a unit of account?

it is used to transfer wealth from the present to the future. Money is a unit of account when: it is used to communicate the market value of goods and services. For each of the following scenarios, determine whether money is being used as a medium of account, store of value, or unit of account. a.