Economcs Concepts

7 Oct No Comments

(1). It means when you borrow money, you will repay it with an interest. It assumed that money is used to generate profit hence the reason for interest.

(2). The interest rate is cut to make borrowing affordable. The low interest rate will attract more investment and the economy will improve. Due to increased production, More employment opportunities will be created and the economy will be pulled out of recession.

(3). When the economy is in expansion, my expenditure will be high. This is because money in circulation is high and employment opportunities are available. I can access money easily and my confidence is high.

The reverse holds when the economy is in recession. Money in circulation is low and employment opportunities are reduced.

The expenditure depends on interest rates as they affect money circulation.

(4). I will prefer spending the money now because in future, money will reduce its value due to high inflation.

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