This website uses cookies

As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: ""

Show Details
HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
LoginThis is necessary to sign in to the HubPages Service.
Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
AkismetThis is used to detect comment spam. (Privacy Policy)
HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
MavenThis supports the Maven widget and search functionality. (Privacy Policy)
Google AdSenseThis is an ad network. (Privacy Policy)
Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
Index ExchangeThis is an ad network. (Privacy Policy)
SovrnThis is an ad network. (Privacy Policy)
Facebook AdsThis is an ad network. (Privacy Policy)
Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
AppNexusThis is an ad network. (Privacy Policy)
OpenxThis is an ad network. (Privacy Policy)
Rubicon ProjectThis is an ad network. (Privacy Policy)
TripleLiftThis is an ad network. (Privacy Policy)
Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)

Which is better for an economy with slow growth, to increase or decrease the int

  1. alexandriaruthk profile image76
    alexandriaruthkposted 5 years ago

    Which is better for an economy with slow growth, to increase or decrease the interest rate?

    Increasing the interest rate as a monetary policy will affect for example two important sector - automobile and housing. Some economists argue that lowering the interest rate will help the people cope with their debts. Increasing interest rate is the opposite of just that. What is your opinion?

  2. Gamerelated profile image83
    Gamerelatedposted 5 years ago

    Increasing the interest rate will affect all sectors where people need to borrow money not just the automobile and housing sector.  If money is more expensive to borrow then business will borrow less.  This means that business will have less opportunities to expand.  This translates to slower job growth and possibly even a loss of jobs.  Increasing the interest rate will help to limit inflation, but it comes at a cost.

    Lowering the interest tends to have an expansionary effect, but it also can lead to inflation since you are paying less money to borrow money.  This happens in two ways.  As people borrow more money the amount of money in the economy increases.  As the supply of money increases the value of money declines.  Another effect of lower interest is a reduction in the efficiency of investments.  When you invest borrowed money your return on investment just needs to cover the interest on the loan and the capital in order to turn a profit.  The lower the interest rate the less you have to cover and the less productive you have to be.  A decline in productivity relative to the supply of money can lead to inflation.

    To answer your original question, If it is better to increase the interest rate or decrease the interest rate?  It depends on if you have a lot of money.  The more money you have the more inflation affects you negatively.  The less money you have the less inflation affects you.  The people who borrow money actually benefit from inflation.

    Take hyperinflation for example, I borrow $10 from you and I buy two beers at the bar.  One hour later the price of beer increase by 25% and it is now $12.50 for two beers.  If I pay you back the $10 that I borrowed you will no longer be able to buy two beers.  I have now paid you back money that is worth less than it was when I borrowed it an hour ago.  This is the reason why interest rates also tend to be tied to inflation.  The more people expect inflation to be the more they will charge for interest.  Keeping inflation down tends to benefit the rich because they hold onto more money and they tend to lend more money.  Allowing inflation to happen tends to reduce the value of money and helps poor people, especially if they are in debt. 

    The role of the Federal Reserve Bank is to find a balance, but they tend to err on the side of keeping inflation down which tends to help rich people more than poor people.  Overly focusing on keeping inflation down slows job growth and that hurts poor people too.