Question

Explain why interest rates in the United States have been so low.

Explain why interest rates in the United States have been so low.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

The Fed is supposed to maintain low unemployment, stable price level, and a stable economic growth. For years, the Fed has maintained a low-interest rate in order to increase aggregate spending, borrowing, and investment. Low interest helps people borrow more and spend. Also, it helps businesses borrow more, invest and expand economic activities. When people spend more the aggregate demand shifts towards the right. Firms can also invest more to expand production and fulfill the higher level of aggregate demand. So, expansion in aggregate demand-supply expands real output. When the real output is higher, firms hire more workers and unemployment goes down. So, the low interest helps in achieving a stable price, stable growth, and low unemployment.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Why have interest rates been so low during the past decade and what alternative explanations that...
Why have interest rates been so low during the past decade and what alternative explanations that were given to explain it.
Currently, interest rates in the United States are understood to be very low. With that in...
Currently, interest rates in the United States are understood to be very low. With that in mind, if a new usury law came into effect limiting interest rates to below 50%, would it have an effect?
1. Given our wealth and medical advances, why does the United States rank so low for...
1. Given our wealth and medical advances, why does the United States rank so low for life expectancy? (as of 12/07)?  What is the connection between income and health?
The Federal Reserve has kept interest rates low to encourage borrowing. Why have consumers not spent...
The Federal Reserve has kept interest rates low to encourage borrowing. Why have consumers not spent more money despite low interest rates?
Unemployment rates have been higher in many European countries in recent decades than in the United...
Unemployment rates have been higher in many European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly.
Is it better for an economy to have relatively low interest rates to encourage more borrowings...
Is it better for an economy to have relatively low interest rates to encourage more borrowings or is it better to have relatively high interest rates to encourage savings? Why?
A key reason that unemployment in the United States is so low compared to most of...
A key reason that unemployment in the United States is so low compared to most of Europe is because of ________ unemployment. a. no structural b. low frictional c. no cyclical d. high structural e. low structural If the monopsony model assumptions hold as predicted:: a. the classical model of no actual involuntary unemployment is true. b. a minimum wage can increase both wages and employment. c. minimum wages are ineffective at raising entry level wages. d. a minimum wage...
Some argue that low interest rates before crisis of 2008 was partly due to large savings...
Some argue that low interest rates before crisis of 2008 was partly due to large savings from Asian and oil rich countries pouring into the United States. This hypothesis is known as “Global Saving Glut” hypothesis. Use the bond market framework to analyze the implication of this hypothesis for interest rate in the United States.
Why would low policy rates suggest low long-term interest rates? A simple answer- less than a...
Why would low policy rates suggest low long-term interest rates? A simple answer- less than a paragraph
With an abundance of low-priced labor relative to the United States, it is no surprise that...
With an abundance of low-priced labor relative to the United States, it is no surprise that China, India and other developing countries specialize in the production of labor-intensive products. Where does that leave the United States? In what areas will the United States have a comparative advantage?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT