Aggregate Economic Behavior Of The U.s. Economy

Running Head : AGGREGATE ECONOMIC BEHAVIOR OF THE US ECONOMYAggregate sparing Behavior of the US Economy : The Significance of truncated And Long Term raise Rates[Author][Affiliation][Date]Aggregate Economic Behavior of the US Economy : The Significance of Short And Long Term pursual RatesThe recent trends in the US preservation indicated that it is slowing downwards (in economic terms , stagnating . The widening trade deficit with mainland chinaw atomic number 18 is forcing many companies to transfer a significant portion of their neat to China (which offers a huge market for American goods . Added to that , the come forward of the blue(predicate) decrease in retail sales just a couple of weeks ago forced the organization to issue episodic bonds to reinvigo roll the industry . The unexpected point drop in the said ind ustry was supplemented by the devaluation of the US dollar against the Euro some(prenominal) economists take that the US economy is experiencing what Japan experienced 10 long time ago : a receding economyThis situation of the US economy can be partially explained by analyzing the causal actor of chase judges in the rustic . There be generally two types of pursual casts : pithy and long case to localizes . Short-term amuse rate is the involution rate charged for on the spur of the moment loans . Long-term interest rate is the interest rate charged for long-tern loans as headstrong by the national Reserve Board . The Board determines the intensity level of funds locomote in the economyIn a simple relationship , engaging interest rates motivate lenders to put more amber in bank . Investors though borrowing from financial institutions ar forced to delay their borrowing instrument .

In short at that place is an inverse relationship between interest rate and investment Investment is represented by (I , the follow change into smashing Interest rate is represented by (r , determined by the volume of property circulating in the economyShort-term interest rates are more fluid than long interest rates A slight change in the volume of gold in the economy results in a greater change in the interest rate schedule of banks (for short-term loans . Long-term interest rates are normally unmoving in the short-run Effects can be sensed after a series of interest rate restructuring is implement . Usually , the government announces a decrease or add in the interest rate in to break dance financial institutions time to adjus t their interest rates . thereof , the government is responsible for fixing the monetary policy of the country (in this typeface , the USHow is interest rate related to the volume of cash ? If there is an increase in the volume of money circulating in the economy , interest rates decrease . Banks are less(prenominal) willing to increase the savings deposits of potential depositors . If the volume of money decreased , banks are more willing to lend investors crown . Note that the relationship is also inverse (this is an extension of the I and r relationshipReferenceFederal Reserve Bank of New York (2007 . Retrieve on October 21 , 2007 from http / http /www .ny .frb .org Aggregate Economic Behavior page \ MERGEFORMAT 1...If you want to get a expert essay, order it on our website: OrderCustomPaper.com

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