Increase in Real Economic Growth Samples †MyAssignmenthelp.com

Question: Discuss about the Increase in Real Economic Growth. Answer: Increase in Real Economic Growth This would be likely to be due to a in capital return. A rise causes an in investment, and the change raises interest rates. The growth would favor the fiscal outlook. Increase in Inflation Interest rates always tend to raise with increased expectations of inflation. Consumers are faced with difficulty to make a choice now or postpone their purchases into the future (Keynes, 2016). If prices are to rise early, they tend to buy sooner, in demand for borrowing and to lower savings, and interest rates go up to balance demand and supply. Increase in Risk Premium The sudden would be unexpected. It would lead to default or debt restructuring, causing investors to reduce holdings of sovereign debt in a given country. This would cause the rates to go up without any increase in GDP. Foreign exchange market allows participants to buy, sell or trade currencies. A in the interest rates of a country rises demand of the currency of that country and its value appreciates. An in the rates makes investors want to capitalize high returns. The currency is viewed to be stronger because investors seek more of the currency to make more profit. The money market is a market that provides liquidity to market partaker through short-term financing. Increase in interest rates does not directly affect the money market (Benes, Berg, Portillo, Vavra, 2015). However, it makes it more expensive to purchase them since it is more costly to borrow money from banks. Public companies cut down their expansion plans, and the money market prices take a hit. Increased interest rates lower the level of borrowing or holding money and rather encourages saving. People tend to borrow less from the lending institutions, thus spending less of their money. It the money in supply as the rates make borrowing more expensive. This discourages high spending. References Benes, J., Berg, A., Portillo, R. A., Vavra, D. (2015). Modeling sterilized interventions and balance sheet effects of monetary policy in a New-Keynesian framework.Open Economies Review,26(1), 81-108. Keynes, J. M. (2016).General theory of employment, interest and money. Atlantic Publishers Dist.