Question

​If lower oil prices and lower commodity demand from China cause inflation rates to fall, what...

​If lower oil prices and lower commodity demand from China cause inflation rates to fall, what should happen to interest rates? Why?
Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Impact of oil prices & inflation on interest rates:

The oil pries & interest rates are always related to each other.

Lower oil prices will increase the interest rates. This is because when the oil prices drop, the demand for oil will be less as people spend less time & money on driving. This is because increase interest rates raise the costs of manufacturer & consumer as a result of which they spend less time & money on driving.

We can also see the reverse case. When the oil prices rise, the demand for oil will be more as a result of which consumers bid up the price of oil. This can cause the interest rates to fall as people will be easily available to borrow & spend money on driving as a result of which demand for oil can be more. Hence when demand increase, oil prices will also raise.

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
Commodity​ Prices, the​ Dollar, and Monetary Policy. Suppose the U.S. is a major source of demand...
Commodity​ Prices, the​ Dollar, and Monetary Policy. Suppose the U.S. is a major source of demand for world commodities and supplies of commodities are limited. Expansionary monetary policy could affect commodity prices because A. international prices will rise as U.S. supplies​ increase, increasing domestic prices. B. international prices will​ fall, since U.S. demand for commodities is rising causing domestic prices to rise. C. domestic prices will rise as aggregate demand​ increases, and since supplies of commodities are​ limited, world prices...
Suppose that China and the Oil Exporting countries announce that they will each sell 30% of...
Suppose that China and the Oil Exporting countries announce that they will each sell 30% of their investment in US government bonds. All other things equal, you would expect that: a. bond prices in the US would rise and the US interest rate would fall b. bond prices in the US would fall and US interest rates would rise. c. bond prices and interest rates would both decline d. bond prices and interest rates would both rise What is the...
1. A lower inflation rate in Canada relative to other countries causes the Canadian dollar to...
1. A lower inflation rate in Canada relative to other countries causes the Canadian dollar to appreciate because A) Canadian real interest rates fall. B) prices of Canadian resources fall in international markets. C) speculators anticipate depreciation of the Canadian dollar. D) Canadian products and services are relatively cheaper so exports to R.O.W. increase. E) Canadian products and services are relatively cheaper so imports from R.O.W. increase. 2. An inflationary gap results from A) appreciation of the C$ leading to...
If asset prices fall and inflation expectations remain unchanged, what happens to inflation and unemploy
If asset prices fall and inflation expectations remain unchanged, what happens to inflation and unemploy
The aggregate demand curve is downward sloping because A) a lower inflation rate causes the real...
The aggregate demand curve is downward sloping because A) a lower inflation rate causes the real interest rate to rise, and stimulates planned investment spending. B) a higher inflation rate causes the real interest rate to fall, and stimulates planned investment spending. C)a higher inflation rate causes the real interest rate to rise, and stimulates planned investment spending. D) a lower inflation rate causes the real interest rate to fall, and stimulates planned investment spending.
Explain why a zero lower bound limit on nominal interest rates can cause a bend in...
Explain why a zero lower bound limit on nominal interest rates can cause a bend in the Aggregate Demand Curve. Draw a graph to show one way in which this might be a problem for the economy or for managing the economy.
Oil prices had steadily increased (mostly because of sustained energy demand from developing economies). Depict the...
Oil prices had steadily increased (mostly because of sustained energy demand from developing economies). Depict the effect of higher oil prices in the AD-AS diagram, labeling the short run equilibrium as C. Going from the initial equilibrium A to C, draw your graph so that the outcome of your analysis a recession with (moderate) inflation. [Don't worry about quantitative realism...]
What are some reliable sources showing the cause for the decline of global oil prices please...
What are some reliable sources showing the cause for the decline of global oil prices please use Journal articles ,Official Reports from Agencies ,Press releases, Research Institutions: University, Government, Articles
1- Explain what happened to prices on island? Why did the prices do this and what...
1- Explain what happened to prices on island? Why did the prices do this and what is this phenomenon called? In real world explain why inflation discouragrs people from saving thier money? 2- explain why toda’s current econmic relationship between the U.S. and china does not benefit both parties? Explain what is meant by the U.S. dollare being an econmic “teump card” and what whould likely happen if it wasn’t?
Lecture 3: Discuss in words and graphs what will happen to bond prices, interest rates, and...
Lecture 3: Discuss in words and graphs what will happen to bond prices, interest rates, and the dollar volume of bonds issued, due to factors such as: rising inflationary expectation, increased indebtedness, changes in taxation policies, etc. Think in terms of both supply and demand. Explain graphically, how increased government bond issuance can result in a decrease of corporate bond issuance, and lower corporate bond prices.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT