BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Rising interest rates affects spending because the cost of borrowing money goes up. So, if you have a mortgage, any type of credit card or a loan, you could end up paying more for the money you originally borrowed. This will mean that you inevitably have less money to spend on goods and services.

Detailed explanation-2: -When interest rates are rising, both businesses and consumers will cut back on spending. This will cause earnings to fall and stock prices to drop. On the other hand, when interest rates have fallen significantly, consumers and businesses will increase spending, causing stock prices to rise.

Detailed explanation-3: -Another potential result of higher interest rates: Businesses may pull back on borrowing and investing, which means consumers and businesses would start spending less and eventually bring demand back down to a level that’s commensurate with supply.

Detailed explanation-4: -Higher interest rates encourage saving and discourage borrowing and, in turn, spending. In response, companies increase their prices more slowly or even lower them to encourage demand. This reduces inflation. Lower interest rates work in the opposite way and can help increase inflation if it is too low.

Detailed explanation-5: -Higher rates alter the equity investment landscape One is that it could affect future earnings growth for U.S. companies. “As the Fed tightens interest rates, we can expect a decline in economic growth, ” says Freedman. In fact, GDP growth slowed considerably in 2022, growing at 2.1% (compared to 5.9% in 2021).