Economic Scenarios Higher Interest Rates, More Capital Essay

Open, View, and/or
Download this Document

Total Length: 621 words ( 2 double-spaced pages)

Total Sources: 4

Page 1 of 2

Economic Scenarios

Higher interest rates, more capital invested

During the 1980s, when President Reagan was attempting to stimulate the economy, he radically lowered taxes. The U.S. was in the grips of 'stagflation,' or high unemployment and high inflation, a combination which historically is not supposed to occur together. The lower corporate taxes and lower taxes for wealthy individuals eventually encouraged more investment in business. "The Fed was resolved to stop inflation…[and] kept raising rates in 1980 and '81, eventually bringing both the economy and inflation to a standstill" (Solomon 2009). By the mid-80s, interest rates were still high, but investment capital in the economy had increased.

Lower interest rates, less capital invested

Low interest rates and low rates of capital invested in the economy are usually characteristic of a recession. This occurred very recently, during the Great Recession of 2008, when the Fed slashed interest rates to historically low levels to stimulate growth. "The Federal Reserve surprised Wall Street…by cutting its fed funds short-term interest rate target by three-quarters of a percentage point…The move had the effect of reducing rates on mortgages and home equity loans, and reassured investors that the Fed will do what it can to spur economic activity as long as the threat of recession looms" (Barr 2008).

Stuck Writing Your "Economic Scenarios Higher Interest Rates, More Capital" Essay?

View All Our Example Economic Scenarios Higher Interest Rates, More Capital Essay

Have A Custom Example Essay Written

However, despite this encouragement to banks to lend money, there has been a widespread reluctance amongst many businesses to expand and hire more workers.

Lower interest rates, more capital invested

In the 1990s interest rates were much lower than they had been in the 1980s, but the economy was booming and more capital was being invested in the economy, partially as a result of the revolution in technology that came to be known as the dot.com boom (and bust). After the economic bubble began to deflate in 2001, the Fed lowered interest rates so much that a housing 'bubble'….....

Show More ⇣

     Open the full completed essay and source list


OR

     Order a one-of-a-kind custom essay on this topic


sample essay writing service

Cite This Resource:

Latest APA Format (6th edition)

Copy Reference
"Economic Scenarios Higher Interest Rates More Capital" (2013, April 05) Retrieved May 5, 2024, from
https://www.aceyourpaper.com/essays/economic-scenarios-higher-interest-rates-101866

Latest MLA Format (8th edition)

Copy Reference
"Economic Scenarios Higher Interest Rates More Capital" 05 April 2013. Web.5 May. 2024. <
https://www.aceyourpaper.com/essays/economic-scenarios-higher-interest-rates-101866>

Latest Chicago Format (16th edition)

Copy Reference
"Economic Scenarios Higher Interest Rates More Capital", 05 April 2013, Accessed.5 May. 2024,
https://www.aceyourpaper.com/essays/economic-scenarios-higher-interest-rates-101866
   

Open, View, and/or
Download this Document
order custom essay example