Hello All,

My thoughts after reading so far are that the money supply constantly increases and decreases. When the money supply increases the interest rates tend to go down because there is a surplus. On the other hand when the money supply decreases the interest rates go up because there is a deficit. In times where there is a deficit we may see fewer people applying for loans and we may see the lenders who have a deficit looking to borrow from other lenders, or sell loans to them. This is generally a positive time for lenders because they can charge higher interest rates which will, in turn, make them more money. If the money supply increases or remains constant along with the supply of currency the interest rate will generally still increases even if only slightly and vice versa if the demand decreases interest rates will fall. Banks rely heavily on what the Federal Reserve says and interest rates are set accordingly. It is often difficult to tell what the rates will be from day to day as there are so many factors in the economy at play. I may have this backward (in regards to when there is a surplus/deficit) – but I’m learning.

3. Respond to the following classmate:

Melissa
Schine

8 hours ago, at 1:31 PM

NEW