March 25, 2023

How does a change in interest rates impact economic growth?

Interest rates are a key factor in the growth of an economy. When the interest rate is adjusted, it can have a direct impact on the spending, borrowing, and saving habits of consumers and businesses. An increase in the interest rate can reduce the amount of money people are willing to borrow and spend, reducing economic activity. On the other hand, a decrease in the interest rate can create an environment of increased borrowing and spending, which can lead to economic growth. As such, a change in interest rates can have a significant impact on an economy's growth. Therefore, it is important that businesses and governments consider the effects of changing interest rates when formulating economic policies.