Eli5- Inflation and High interest rate

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If the government or the bank increasing the interest rate to tackle inflation so that people would have less money to spend and the hoping the prices coming down. Wouldn’t it be easy to let people have the money so that they can spend during inflation rather than giving away in name of interest rate?

In: Economics

4 Answers

Anonymous 0 Comments

Raising interest rates controls inflation because it makes people less likely to borrow money to buy things. It also makes them more likely to save their money. Giving more money to people to spend during high inflation just makes it worse, because demand stays high so prices keep rising

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