Please explain how higher interest rates helps reduce inflation? No matter what, people still have to buy shit. So how does high interest rates get people to spend less? People still need to buy homes, cars, food regardless of what the interest rate is. Those are kind of necessities, so shouldn’t the government do more to make it more affordable?
And if businesses are paying more for a product, then they have to charge the customer more. They can’t charge less just because people aren’t buying. If they do they won’t make any money themselves.
I’m confused. Please explain it to me.
In: Economics
>People still need to buy homes, cars, food regardless of what the interest rate is.
Lots of people do, sure. But there’s a huge demand for homes, cars, and food that people can otherwise go without for the time being. (less so for food, of course)
Like I have a perfectly good car, literally zero problems with it at all. I still kinda wanna get a new one though, but because interest rates on loans are higher now I decided to not do that. That reduces the demand for cars by one, and I know I’m not the only person that did that.
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