How Does an Increase Interest Rate Affect the Economy in the Uk?
CONTENTS
1.0 Introduction
1.1 Background……………………………………………………………………2 1.2 Definition of interest rates……………………………………………………..2
2.0 How does an increase interest rate affect the economy in the UK? 3.1 Encourage people saving money and reduce borrowing……………2-3 3.2 Decrease firms to investment……………………………………………..3 3.3 Promoting the exchange rate, and makes exports less………………...3 3.4 Reduce the aggregate demand and inflation rate………………………4 3.5 The price and cost will fall……………………………………………….4-5 3.6 Increase in unemployment………………………………………………...5
3.0 Evaluation 3.1Control the economy growth stable………………………………………6 3.2Policy conflicts, unemployment…………………………………………6-7
4.0 Conclusion…………………………………………………………7
Bibliography……………………………………………………………8
1
1.0 Introduction
“Interest rate is the price paid by a borrower to a lender, usually on the basis of X percent of the capital per annum” (Gilpin, 1970, p.134). The interest rates in the UK are always set by the Bank of England which is the Central Bank in the UK. The Central Bank also operates monetary policy to ensure stability. The interest rate as part of monetary policy, in order to keep the inflation low and keep the economic growth stable and high over a sustained period of time (INTO Foundation booklet, 2008). However, in current years, the interest rate is very low in the UK. As a result of the financial crisis which stocked in 2008 in the USA, the economic in the UK has also been affected deeply. The UK’s interest rate now is 0.5%, it falls to the lowest for half a century (Boulden, 2009).
This essay discusses how interest rates affect the UK’s economy. I will describe how interest rates work in the current economic situation. The interest rates contribute to the economic growth in the UK.
2.0 How does an increase interest rate affect the economy in UK?
2.1Encourage people saving money and reduce borrowing
First, a increasing interest
1.0 Introduction
1.1 Background……………………………………………………………………2 1.2 Definition of interest rates……………………………………………………..2
2.0 How does an increase interest rate affect the economy in the UK? 3.1 Encourage people saving money and reduce borrowing……………2-3 3.2 Decrease firms to investment……………………………………………..3 3.3 Promoting the exchange rate, and makes exports less………………...3 3.4 Reduce the aggregate demand and inflation rate………………………4 3.5 The price and cost will fall……………………………………………….4-5 3.6 Increase in unemployment………………………………………………...5
3.0 Evaluation 3.1Control the economy growth stable………………………………………6 3.2Policy conflicts, unemployment…………………………………………6-7
4.0 Conclusion…………………………………………………………7
Bibliography……………………………………………………………8
1
1.0 Introduction
“Interest rate is the price paid by a borrower to a lender, usually on the basis of X percent of the capital per annum” (Gilpin, 1970, p.134). The interest rates in the UK are always set by the Bank of England which is the Central Bank in the UK. The Central Bank also operates monetary policy to ensure stability. The interest rate as part of monetary policy, in order to keep the inflation low and keep the economic growth stable and high over a sustained period of time (INTO Foundation booklet, 2008). However, in current years, the interest rate is very low in the UK. As a result of the financial crisis which stocked in 2008 in the USA, the economic in the UK has also been affected deeply. The UK’s interest rate now is 0.5%, it falls to the lowest for half a century (Boulden, 2009).
This essay discusses how interest rates affect the UK’s economy. I will describe how interest rates work in the current economic situation. The interest rates contribute to the economic growth in the UK.
2.0 How does an increase interest rate affect the economy in UK?
2.1Encourage people saving money and reduce borrowing
First, a increasing interest
Bibliography: 2008, INTO Foundation Certificate in Economics, Finance and Management booklet. Macroeconomics. BEGG, D., FISCHER, S., and DORNBUSCH, R., 2003. P. 177, Foundations of Economics. Berkshire: McGraw-Hill Education. BOULDEN, J., 2009. Bank of England cuts UK interest rates to new low [online]. London: CNN. Available at: <URL:http://edition.cnn.com/2009/BUSINESS/02/05/uk.interest.rate/index.html> [Accessed 25 August 2009]. Economics Essays, n.d. Effects of Increased Interest rates in UK Economy. [online] Available from: <URL: http://www.economicshelp.org/2007/05/essay-effects-of-increased-interest.html> [Accessed 28 August 2009] GILPIN, A., 1970. Dictionary of economic terms. 2nd ed. London: Butterworth. SLOMAN, J., 2007, Essentials of Economics. 4th ed. Essex: Pearson Education Limited. 1376words 8