American Interest Rates

Analysis of interest rates and its impact on the economy in context of the present U.S economic situation.

yThis paper discusses indepth the state of the economy in context of the rise and then consistent drop in interest rates over the last 5 years. It discusses what the impact is such rate cuts is on all aspects of the economy and also highlights the various kinds of interest rates.

Table of Contents
Overview of Interest Rates and their Significance as a Macroeconomic Tool
Types of Interest Rates
Impact of Change in Interest Rates on the Current Economy
“The Federal Reserve like other Central Banks seeks to maintain a financial environment within which competitive markets support the efficient use of productive resources. The overarching principle is that central bank should provide the necessary monetary and fiscal stability in a way that leaves the maximum freedom of action to private markets. In keeping with this principle, monetary policy is implemented by indirect means, with an interest rate policy instrument than with direct credit controls. Thus interest rates are part of the Federal Reserve’s key macroeconomic tools that it has at its disposal to control the markets and inadvertently the entire economies money supply. The quantity of money within an economy can determine various exogenous and endogenous factors that can keep the markets and the economy in close range of the equilibrium position. This is important in-order to prevent the extensive number of boom and bust cycles the American economy has faced in the early part of the last century.”