Interest rates, Managerial Economics

Interest rates

  • Decreasing the rate of interest may not encourage investment but increasing the interest rate tends to lock up liquidity in the financial system.
  • Governments may also be unwilling to put up interest rates because, as so many voters are house buyers, this is extremely unpopular.
  • With a large national debt to service, governments are less willing to raise interests rates as this will raise their own expenditure.
  • Finally, with so may foreign deposits in their monetary system (sector), each percentage rise in interest rates means a drain of foreign currency on the balance of payments.
Posted Date: 11/30/2012 4:40:10 AM | Location : United States

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