Question

How do interest rates affect millions of other buyers and their decisions,then how that affects the whole economy? Explain.

Answer 1

Interest can be defined as the cost for borrowing money for making investments or spending. It motivates lenders to lend more money in return for some percentage of money. The interest rates fluctuate based on the economic growth and inflation levels. So the central bank of the country keeps on the economic development and inflations and changes the interest rates accordingly. The changing interest rates would affect the consumer spending, future investments and overall the health of the economy. So during slow growth of economy in order to push the growth the interest rates gets reduced which encourages people to spending. While during high inflation it increases the interest rates so that people would feel to deposit in banks in order to reduce the inflation levels.