How will a Change in the Interest Rate Change the Future Essay

Daily economic activities have an important influence on personal financial planning. In our society, the forces of supply and demand play an important role in setting prices. Economics is the study of how wealth is created and distributed. By doing my research, I found that each economic situation would affect me at a personal level.

In this essay I shall be discussing the factors which influence the level of and access to unsecured debt held by households.

The definition of consumer expenditure is the amount of money spent by households in an economy. The definition of investment is the spending by firms on capital good such as new machines etc. Finally the definition of interest rates is the proportion of a loan that is charged as interest to the borrower, normally expressed as an annual percentage. In the UK the interest rates are set by the Monetary Policy Committee and are usually used in order to influence levels of aggregate demand.

Attitudes about spending changed drastically. At this point, more people had access to credit cards because credit card companies stopped limiting their customer base to the wealthy, and began issuing cards to people with moderate to low incomes (Garon, 2012, CNN World). This gave Americans a way to purchase goods and services immediately, even if they didn’t have the cash on hand. The seven to eight percent savings rate maintained in the United States from the 1960s to the 1980s plummeted to less than two percent, and remained so until the first decade of the 21st century (Melicher & Norton, 2014, p. 168).

1. Define any key terms that you feel are important in answering the following question as they are defined in the textbook and explain, in your own words what those definitions mean, and then thoroughly analyze each of the following changes in the market for loanable funds to answer the these questions Use the diagrams below, resizing them as necessary, to illustrate your analysis in explaining what happens to private savings, private investment spending, and the rate of interest if the following events occur. Assume the economy is closed (no transactions are made with foreign countries).

Consumers are utility maximisers, they maximize their utility by taking a decision when they buy something. They spend money on those things which are cheaper as well as qualitative for them. As shown in the fig.1, the budget line illustrates the limits of a consumer’s choices. The area left side the budget line is affordable by consumer.

“With the jobs report behind and barring the truly unforeseen, the Federal Reserve has a green light to raise interest rates by 25 basis points at the March meeting”. As the article gives evidence in raising the interest rate with respect to the rising employing rate, we can interpret a substantial difference in the expenditure trends for households. The shift in interest rate subsequently raises the prices of goods and services. As there are more people with jobs, it is more likely to have companies sell their products. More disposable income means greater potential in consumer expenditure. Households who have been buying the minimum needs will start to consume to satisfy wants and the luxury

We have a long story of debt, but it seems no one has been able to make it better. If the debt is increasing over time, the government has a budget deficit. Charles C. Turner, et al, define deficit as spending that exceed revenue (482). In history, basic deficit or debt was usually from over spending from a war and economic issues like a recession or depression. Then the government had a budget deficit almost every year “between 1970 and 1997,” but tax cut and more spending on defense by President Reagan in 1981 added more growth to the deficit. Also, another cause is from reducing of productivity seem in the GDP and lower tax rate (tax cut) (483). Even when the government had some budget surplus, still, it could not cover the debt. In 2012, the debt grew “over $ 16 trillion,” (482-483) and has increased more in recent year plus 2.9 percent of budget deficit in 2016 (The 2016 Long Term Budget Outlook, 2). To manage the economic depression, sometime policymakers cut the taxes and increase spending again by putting more money into private sectors (Turner, 483); therefore, government goes further with the budget unbalancing. There are several reasons that lower tax rate will not reduce the budget deficit closer to a balance.

     Dave Pettit of The Wall Street Journal writes a daily column that appears inside the first page of the journal's Money & Investment section. If the headlines of Mr. Pettit's daily column are any accurate record of economic concerns and current issues in the business world, the late weeks of March and the early weeks of April in 1994 were intensely concerned with interest rates. To quote, "Industrials Edge Up 4.32 Points Amid Caution on Interest Rates," and "Industrials Track On 13.53 Points Despite Interest-Rate Concerns." Why such a concern with interest rates? A week before, in the last week of March, the Fed had pushed up the short-term rates. This

An increase in autonomous consumer expenditure causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________, everything else held constant.

Increase in interest rates makes borrowing an expensive affair and in turn killing the demand for loans and other related products and hence negatively impacting

From the view of demand, after 2000, the decreasing interest rate and the availability of

- You aren't intending to inhabit the home for many years. He says if you understand you will be relocating as a result of your occupation or simply because you'll be adding onto your household or downsizing (your children are heading to college), then you 'd need to consider obtaining a hybrid ARM with terms of five, seven or 10 years. (That is, you begin with a fixed

Beginning in the twentieth century, household debt levels were increasing as the standard of living was rising. As technology and innovation was becoming a large part of industrial growth and new commodities were becoming available to consumers, households began demanding a wider array of goods and services. These commodities included vehicles, appliances and other modern devices were heavily demanded by North American and European consumers. These commodities were purchased on credit and were considered ‘easy credit’. This allowed the mindsets of consumers to shift from saving to spending.

This week’s material was associated exclusively to financial awareness. The fundamental ideas for proper financial management were valuable to me. Managing the money that I received as aid have had me slightly stressed, there is always the fear of taking bad decisions and end up without enough money to finish the semester. Nevertheless, since the semester is closing, I now notice that I did somewhat decently until this point regarding my budget, but still, the preoccupation in regards future finances is still present.