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How does a fall in the real interest rate affect consumption decisions?
Wiki User
∙ 15y ago
The interest rate is basically the price of money. The main concept behind the interest rate when thinking about consumption decisions is opportunity cost. In terms of the household, if the interest rate is high the opportunity cost of consumption is high because the rate of return for investing is high. Prospectively, the household could have much more purchasing power if the household would invest rather than consume. If there is a higher interest rate consumption will probably go down as more people will invest more because the returns to investment will be higher. It will depend on if the household values consumption now more than consumption later, if the goods and services they need at the present is worth more than how much they will receive in the future through investment. If the interest rate is low the opportunity cost of consumption is low because the rate of return for investing is low. There will be very little value lost to consumption now because the household will get very little from investing when there is a low interest rate.
Wiki User
∙ 15y ago
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What is the opportunity cost to a fully employed economy of increasing capital investment?
A fall in consumption
How do interest rates affect corporate bond value?
When interest rates rise, bonds lose value; when interest rates fall, bonds become more attractive.
If there is an excess supply of money?
deposit more into interest-bearing accounts, and the interest rate will fall.
What prices fall as interest rates rise?
A bond
What does the term structure of interest rates indicate?
The term structure of interest rates is often referred to as a yield curve. It shows the relative level of short-term and long-term interest rates at a point in time. Knowledge of changing interest rates and interest rate theory is extremely valuable to corporate executives making decisions about how to time and structure their borrowing between short- and long-term debts. the yield curve indicates the movements of interest rates. For example, a downward curve indicates that the interest rate will fall in the future. these signals help firms to manage their debt structure.
What is the opportunity cost to a fully employed economy of increasing capital investment?
A fall in consumption
How do interest rates affect corporate bond value?
When interest rates rise, bonds lose value; when interest rates fall, bonds become more attractive.
What is most likely to cause someone to fall over board?
Alcohol consumption.
When you have a stroke does your hair fall out?
No a sstroke does not affect your hair fall.
Why is it guys fall out of love sometimes?
They don't fall out of love. They just lose interest.
How does subordination affect the interest rate on a bond?
Subordination affects the interest rate on a bond because it is unsecured and has lesser priority than that of an additional debt claim on the same asset. It has higher interest rate required to compensate for the higher risk. If interest rate has been increased the price of the bond will fall. If the price of the bond falls, the yield that can be earned will increase.
If there is an excess supply of money?
deposit more into interest-bearing accounts, and the interest rate will fall.
Why might a culture in the Northern Hemishpere have a consumption festival in the late fall?
That is when the harvest has come in.
What prices fall as interest rates rise?
A bond
How did the fall of China affect the the US?
China had never fallen and it will never fall.
What does the term structure of interest rates indicate?
The term structure of interest rates is often referred to as a yield curve. It shows the relative level of short-term and long-term interest rates at a point in time. Knowledge of changing interest rates and interest rate theory is extremely valuable to corporate executives making decisions about how to time and structure their borrowing between short- and long-term debts. the yield curve indicates the movements of interest rates. For example, a downward curve indicates that the interest rate will fall in the future. these signals help firms to manage their debt structure.
What affect the kind of precipitation that will fall?
Temperature
