how do negative interest rates work?
In: Economics
Well if you have a loan you recieve the interest instead of paying the interest, if you have savings, you pay interest over it instead of getting interest.
And it is basically a last ditch attempt to prevent a recession. In harsh economic times, people and businesses tend to hold on to their cash while they wait for the economy to improve. But this behavior can weaken the economy further, as a lack of spending causes further job losses, lowers profits, and reinforces people’s fears, giving them even more incentive to hoard.
So negative interest give you an incentive to spend money and strenghten the economy.
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