Since the Federal Reserve lowered the interest rates it has become one of the contributing factors to the present spiral of the economy in the United States. Lower interest rates cause the value of the United State’s money to decrease. When interest rates were lower this also resulted in a subprime mortgages to come in to light. Subprime mortgages were designed to help individuals obtain loans that they could not generally afford with an increased interest rate. Since then the interest rates are slowly starting to increase causing foreclosures to those whom cannot afford their homes any longer. Foreclosure is a problem on the United States economy as a whole. The United States international transactions are conducted with the United States dollar. Problems in the United States economy results in a foreign exchange issues as well.
Interest rates are a huge contributing factor in consumer spending to lenders. Low interest rates results in more consumers spending. Interest rates results in more consumer spending. Interest rates affect the United States economy within capital investments. When the interest rates increase causes an increase in borrowing which then decreases capital investment which then leads to an increase in the aggregate demand. Consumer spending is a large contributing factor of the United States aggregate demand, changing in interest rates effects the economy as a whole.
A current fiscal policy that is being recommended by the government leadership is the monetary policy. The monetary policy is how the Federal Reserve maintains the United State’s supply of money in order to keep inflation down and stabilize the growth of the economy. The effectiveness of the monetary policy is that it is difficult to determine the effect within the economic output and the impact is of mixed