Buy custom Impacts Of Inflation
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| Topic: |
Business
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| Number of pages / Number of words: |
3 / 722 |
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That is why Central Banks often increase interest rates to try and fight inflation.
However, businesses have higher costs due to interest rate increases and might just, if they are able to, charge more for their merchandise or services. This would lead to higher prices and in turn, higher inflation...
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This will then result in less supply, and thus in the long run, higher prices. Higher interest rates also mean more insolvency, more jobs lost and less purchasing power of the customers. This is why the Central Banks often then lower the interest rates, to try and stimulate economic activity.
High interest rates might attract foreign investors, who are looking for a high return on investments...
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General points of the essay
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