Individual News Article
October 21, 2013
Dr. Darryl Baker
Individual News Article
A factor that consumers must consider today is the impact that interest rates have on the United States economy. Economists believed that the housing market would begin to heal, auto sales would hit a record high, and the government would begin running a surplus. However, the only correct prediction was the rise in auto sales. Auto sales rose tremendously, and was a good sign of the economy slowly recovering. Even though the government has full control of the economy their actions greatly affect the economy. In this paper I will analyze the effect that interest rates have on ...view middle of the document...
But if lack of demand is the main culprit, then replacing the lost demand through aggressive policy can help us recover faster” (para. 1).
Demand for a supply is composed of three things: desire, ability to pay, and willingness to pay. If the demand for a product goes up it shows that consumers have the ability and the willingness to pay. However, companies must keep in mind that the higher the price, the lower the demand and the lower the price, the higher the demand. Prices are key ingredients in our economy because they make things happen. If consumers want to own items badly enough they will pay more for them. When companies want to sell their products bad enough, they will lower their prices. Supply and demand act as signals to buyers and sellers and is an indicator that encourages increased or decreased production. Finally, prices help to determine who will receive the economy’s output of goods and services. If a consumer’s income is up and interest rates are down there is more disposable income to spend. This creates the demand for the supply and determines pricing.
Supply and demand are the primary forces behind the interest rate levels. Interest rate are a major factor of the income a consumer can earn by lending money, bond pricing, and the amount one will have to pay to borrow money. When the government buys more securities, banks are equipped with more money than they can use for lending, and the interest rates decrease. When the government sells securities, there is a decrease in the amount of money the banks have at their disposal for lending and forcing a rise in interest rates. Interest rate levels are also a factor of the supply and demand of credit. An increase in the demand for credit...