Interest rates fluctuate based on macroeconomic factors like inflation rates, impacting borrowing decisions and investment opportunities.
Interest rates fluctuate based on various macroeconomic factors, including inflation rates and the demand for capital investments. When inflation rises, businesses may be less inclined to borrow money for investments, leading to lower interest rates. Conversely, during periods of low inflation, businesses seek to invest more, increasing the demand for borrowed money and subsequently interest rates.
The supply of loanable funds directly impacts growth and interest rates in an economy. Banks with higher deposits can offer more funds for loans, impacting the accessibility and cost of loanable funds. An increase in the supply of loanable funds often results in decreased interest rates, providing businesses and consumers with more opportunities for investments and purchases.
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