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Essay / Research Paper Abstract
A 10 page paper discussing the role that interest rates play in progress of the economy. Interest rates fill a primary role in determining the path of the economy and the decisions of businesses and investors. The purpose here is to assess some of the ways that interest rates affect the national economy. In a shrinking or slowly-growing economy, businesses' abilities to grow are greatly reduced, and so investors are more cautious in the prices they are willing to pay for a share of stock. Also, higher interest rates make other types of investments more attractive and many investors will increase their holdings in bond markets while reducing those in the stock market. Bibliography lists 5 sources.
Page Count:
10 pages (~225 words per page)
File: CC6_KSeconIntRtEffect.rtf
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Unformatted sample text from the term paper:
During the latter years of the 1990s, some economists who should have known better were suggesting that the business cycle is dead, that it was no longer operational in the
new economy. That type of statement should raise the hackles of those who know it not to be true; MITs Paul Samuelson promoted the same line in 1969, and
the entire developed world was in deep recession by 1973. Delano (2000) even suggested that perhaps the government should create a market "correction" since Fed manipulation of interest rates
had not produced the expected results. Interest rates fill a primary role in determining the path of the economy and the decisions of
businesses and investors. The purpose here is to assess some of the ways that interest rates affect the national economy. Definition At
its simplest, interest rate is defined as "Interest per year divided by principal amount, expressed as a percentage" (Interest Rate). It is the premium that borrowers pay for the
privilege of using someone elses money. Superficially simple, it directs businesses plans for capital improvements and expansion, and it affects investors decisions on where they will place the funds
that they want to subject to investment growth. Interest rates can drive consumers decisions to buy that house now or wait for a
while longer, which in turn directly affects the health of the construction industry and by extension, the national economy. Typically, lower interest rates contribute to greater business and personal
economic expansion; higher rates discourage borrowing and have the effect of slowing the growth of the national economy. The Federal Reserve Board determines
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