US economy: statistics at a glance: http://ig.ft.com/sites/us/economic-dashboard/
As you may or may not know, an upcoming interest rate decision concerning the FED is about to occur. A decision to increase or decrease the interest rates is one that consists of many factors. Factors such as GDP, employment rate, and the rate of inflation will be affected by a increase or decrease in the interest rates.
Definitions:
Dear Janet Yellen, chair of the Federal Reserve, as an economics student I would like to assist you with your decision to increase or decrease the interest rate. According to US economy statistics, the annualized Q2 GDP growth was 3.7%. That is a rather high percentage. A healthy rate of growth is 2%-3%. With that being true, I suggest that you decide to increase interest rates. By increasing the interest rates, several things will occur. Monthly mortgage payments will increase, granting consumers less disposable income on goods and services. This will decrease consumption, therefore lowering GDP.
An increase in interest rates will have another effect. Borrowing will become more expensive, and as such consumers will be less encouraged to borrow money and consume. Firms will be less encouraged to invest, therefore decreasing investment. A decrease in consumption and investment has a direct effect on GDP.
According to another statistic from the US economy statistics, the effective interest rate has been very low (0.25%) since 2009. By raising the interest rates, the FED will gain more money. In this situation of higher interest rates, the "winners" would be the FED and savers. Savers would also be "winners", because with the higher interest rates, they will get more money for saving their money. The "losers" in this situation would be the consumers and firms, due to reasons stated previously.
In conclusion, the interest rates have been very low since 2009. The GDP is a little too high, therefore a consideration of raising interest rates should take place. Raising interest rates will lower the GDP growth in the long run.
As you may or may not know, an upcoming interest rate decision concerning the FED is about to occur. A decision to increase or decrease the interest rates is one that consists of many factors. Factors such as GDP, employment rate, and the rate of inflation will be affected by a increase or decrease in the interest rates.
Definitions:
- GDP: The broadest quantitative measure of a nation's total economic activity. More specifically, GDP represents the monetary value of all goods and services produced within a nation's geographic borders over a specified period of time.
- Employment rate: Indicates the percentage of persons of working age who are employed.
- Inflation: A general increase in prices and fall in the purchasing value of money.
- Interest rate: The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
- Multiplier effect: Refers to the increase in final income arising from any new injection of spending. The size of the multiplier depends upon household's marginal decisions to spend, called the marginal propensity to consume (mpc), or to save, called the marginal propensity to save (mps).
Dear Janet Yellen, chair of the Federal Reserve, as an economics student I would like to assist you with your decision to increase or decrease the interest rate. According to US economy statistics, the annualized Q2 GDP growth was 3.7%. That is a rather high percentage. A healthy rate of growth is 2%-3%. With that being true, I suggest that you decide to increase interest rates. By increasing the interest rates, several things will occur. Monthly mortgage payments will increase, granting consumers less disposable income on goods and services. This will decrease consumption, therefore lowering GDP.
An increase in interest rates will have another effect. Borrowing will become more expensive, and as such consumers will be less encouraged to borrow money and consume. Firms will be less encouraged to invest, therefore decreasing investment. A decrease in consumption and investment has a direct effect on GDP.
According to another statistic from the US economy statistics, the effective interest rate has been very low (0.25%) since 2009. By raising the interest rates, the FED will gain more money. In this situation of higher interest rates, the "winners" would be the FED and savers. Savers would also be "winners", because with the higher interest rates, they will get more money for saving their money. The "losers" in this situation would be the consumers and firms, due to reasons stated previously.
In conclusion, the interest rates have been very low since 2009. The GDP is a little too high, therefore a consideration of raising interest rates should take place. Raising interest rates will lower the GDP growth in the long run.
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