E Essay Example | Topics and Well Written Essays - 500 words

E - Essay ExampleLow interest directs charter several impacts on the state of the economy. When interest lays are dispirited, savers get very little re upsets hence, they are discouraged from holding money, thus, prefer to spend it. It also makes borrowing cheap meaning that individuals and firms allow be encouraged to borrow more and spend on investment. In addition, the low interest evaluate impart lead to depreciation of the currency value, as people would prefer to save in another dry land with better interest rates. The high spending will lead to an increase in aggregate demand, which will in turn lead to an increase in the rate of inflation.Keeping the interest rates low can be a means of stimulating economic result. In the recent past, the global rate of economic growth has been low. By hold offing the interest rates low, there will be a decrease in the value of the dollar. This will make importing more expensive, thus, encourage people to corrupt locally produced goods, leading to an increase in aggregate demand of domestic products that will in turn lead to an increase in output, productivity and employment. Therefore, when there is a high rate of unemployment, the Feds can keep the interest rates low, a factor that will have an eventual impact of stimulating growth of the economy.The amount of investment in bonds and treasury bills will be affected by the current and pay rate of interest. Investors will invest their money on the stocks or bonds that they gestate will have the highest rate of return. If the rate of interest is expected to remain low, investors will tend to invest more as they expect aggregate demand to increase which in turn will translate to higher business earning and returns. If they expect the rate of interest to rise, they will tend to invest in short term bills.Interest rates have an effect on the price of bonds. The price of the bond is inversely related to the interest rate. As the rate of interest rises, the pric e of the bonds