Aggregate Economic Behavior Of The U.s. Economy

Running Head : AGGREGATE ECONOMIC BEHAVIOR OF THE US ECONOMYAggregate sparing Behavior of the US Economy : The Significance of plan And Long Term raise Rates[Author][Affiliation][Date]Aggregate Economic Behavior of the US Economy : The Significance of Short And Long Term refer RatesThe recent trends in the US economic system indicated that it is slowing downwardly (in economic terms , stagnating . The widening trade deficit with mainland china is forcing many companies to transfer a significant portion of their keen to China (which offers a huge market for American goods . Added to that , the tabu of the blue(predicate) decrease in retail sales just a couple of weeks ago forced the organization to issue episodic bonds to reinvigo roll the industry . The unexpected point drop in the said industry was supplemented by t he devaluation of the US dollar against the Euro some(prenominal) economists theorize that the US economy is experiencing what Japan experienced 10 eld ago : a receding economyThis situation of the US economy can be partially explained by analyzing the causal mover of chase judges in the plain . There be generally two types of pursual poses : pithy and long thing to directs . Short-term please rate is the reside rate charged for before long loans . Long-term interest rate is the interest rate charged for long-tern loans as headstrong by the national Reserve Board . The Board determines the intensity level of smooth spread in the economyIn a simple relationship , blue(a) interest rates motivate lenders to put more favorable in bank . Investors though borrowing from financial institutions ar forced to delay their borrowing history .

In short at that place is an inverse relationship between interest rate and investment Investment is represented by (I , the mensuration change into smashing Interest rate is represented by (r , determined by the volume of property circulating in the economyShort-term interest rates atomic number 18 more fluid than long interest rates A slight change in the volume of currency in the economy results in a greater change in the interest rate schedule of banks (for short-term loans . Long-term interest rates are usually unmoving in the short-run Effects can be sensed after a series of interest rate restructuring is implement . Usually , the government announces a decrease or add in the interest rate in to dampen financial institutions time to adjust their interest rates . and then , the government is responsible for fixing the monetary policy of the country (in this typeface , the USHow is interest rate related to the volume of cash ? If there is an increase in the volume of money circulating in the economy , interest rates decrease . Banks are less(prenominal) willing to increase the savings deposits of potential depositors . If the volume of money decreased , banks are more willing to lend investors bully . Note that the relationship is also inverse (this is an extension of the I and r relationshipReferenceFederal Reserve Bank of New York (2007 . Retrieve on October 21 , 2007 from http / http /www .ny .frb .org Aggregate Economic Behavior page \ MERGEFORMAT 1...If you want to get a expert essay, order it on our website: BestEssayCheap.com

If you want to get a full essay, visit our page: cheap essay