Macroeconomic Impact on Business Operations
| Type | Citation | Sources | Views | Words | Pages | Essay # |
|---|---|---|---|---|---|---|
| Term Paper | APA | 3 | 30 | 1473 | 5 | 17629633 |
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1b) Interest rates do not create money per se, they merely stimulate either investment or savings in the marketplace. This impacts directly the amount of money that is being invested back into the economy. The reason for this is that money not spent in other words money that is being saved is money that is not being put to a productive economy purpose. Naturally, a certain amount of savings is healthy for an economy because the ideal situation is that a societys consumers and corporations are in sound fiscal shape. However, savings do not stimulate growth, spending does
On a macroeconomic level, this is reflected in the federal funds rate, which impacts interbank lending. When the federal funds rate increases, the spread between the cost of money for banks and the amount they charge their customers to borrow increases. This encourages lending, which in turn puts more money into the economy. When the federal funds rate decreases, the spread for banks does as well, discouraging them from putting more money into the economy......
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