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Originally Posted by statman32
I seriously have a couple questions for you. I would love if you could help me out.
What are the main forces underlying demand for funds that cause the level of interest rates to go up? What are the forces underlying supply that cause rates to rise?
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MAN forces for r rise: (nominal interest rate i think is it that u mean)
- when a lot of people ask for borrowing money, it could rise the r, the simple law between demand & supply
- when a gouvernment want to rise the saving of their population, so the central bank could rise to r to attract people save more money, (cause a big saving of money is good for economics, especially with a big country deficit as in USA)
- or government when to practise the political of restriction
for r decrease:
- USA practised it, when its economics was not good, decrease the interest rate could encourage people to borrow money to starte his own business, or with a law r, people have more incentive to spend money: like buy a new car, even if the interest rate is very law, it's very interesting to buy a house, so it can relaunch economy in recession.
well there are also some specific field like in finance:
- there a some formule to determine the interest rate.
I hope it can help u, but my specialisation is MICROeconomics, cause macroeconomics are boried, always this rise, and that decrease....
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