Wicksell argued that there is a ?natural rate of interest,? at which desired savings is balanced by desired investment and the economy suffers from neither inflation nor massive excess capacity. A recession occurs when the natural rate of interest falls below the actual interest rate. Instead of savings being channeled into investment and driving the economy forward, firms and households start merely hoarding and the economy stalls, leaving workers and equipment idle.
Wicksell?s work leaves open the question of why the natural rate of interest might rise or fall, so it doesn?t make for much of a causal theory of recessions. But under normal circumstances central bankers can cure recessions by cutting interest rates to bring them closer to the natural rate. This brings saving and investment back into equilibrium and ensures that resources are put to good use.
Source: http://feeds.slate.com/click.phdo?i=f8a5d45ff589eda1bc404e955b16a42e
arthur christmas asus transformer nebraska football nebraska football online deals leap pad lauren alaina
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.