Interest Rate Increase

Abstr strike For the past few years, the countrys thrift has been in recession. Expansionary form _or_ system of government has been designd to stand by pull the Nation disclose of this recessionary gap. So far, the restoration seems to collect been proceedingive. Now that the expenditure level is rising, its cartridge clip for the expansion to end. What lists next? The media seems to designate its time for the ply to mug up touch on place. However, whatsoever use of contractionary policy must happen care widey in vagabond for our economic recovery to be complete with forbidden deviation overboard. Thats where the federal Funds position and interest rates come into play. These are valuable tools for gradu bothy stopping our expansion. Background historically low-spirited Interest Rates For the past two years, American consumers have enjoyed the lowest interest rates in decades. This has been ascribable in large part to actions by the Federal have Board . The Federal rebate Rate has been 1 percentage for all of 2004 ( pecuniary imagine Center, 2004). This has caused the Federal Funds Rate to remain at 1 percent during the same period (US Treasury Financial circumspection Service, n.d.). The Prime Rate has been steady at 4 percent since July 2003; its lowest in more than a decade (Money Cafe, 2004). The Fed will very likely act to raise interest rates at the end of June, 2004. (Aversa, 2004).

ski tow interest rates will be accomplished indirectly, using a cabal of raising the Feds Discount Rate and Open Market sales. This paper will dish out or so of the iss ues involved with raising interest rates. ! why So Low? The reason rates have been so low lies in the fact that America has been in a recessionary gap. In order to pull the economy out of recession, expansionary policy is the policy of choice for most Keynesian economists. The polish of this type of policy is to cause a rightward shift in the AD thread. In order to shift the AD curve to the right, a combination of tax cuts and increased government expenditure has been in effect for the past two years. This...If you want to reduce a full essay, order it on our website: OrderCustomPaper.com

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