Great explanation of Interest Rates and how they are manipulated to effect the economy.

The IDEA Bucket

Interest rates vary depending on the value and demand for money, after all they’re the rent on capital borrowings. Interest rates, due to their association with the whole macro economic system, are controlled by the Federal/Central bank. The banks strike a balance between maintaining a high and a low interest rate , time bound, to fetch everybody’s wager. High interest rates attract capital inflows and low interest rates repel the inflows and favour outflows. Interest rates are manipulated by the Central banks to orderly cater to the demand-supply of the money. When money is demanded at higher levels , interest rates rise up – when the demand falls and supply increases , money becomes cheap and interest rates fall. That is, interest rates are a contrivance to determine the value of money.

   When the Interest Rate (r) is increased by the Federal/Central Bank an increase in the savings account deposits in all the banks throughout the nation can…

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