The general interest, or interest rate, has a major impact on the economy as a whole. Here is an explanation of its main effects:

1. Investment:

When interest rates rise, it becomes more expensive to borrow money from banks. This reduces the amount of loans that businesses and individuals take out to invest in new projects or expand their businesses. Consequently, the rate of investment in the economy may decline.

2. Businesses and high interest rates encourage individuals to increase their savings because they get a higher return on the money they deposit in banks. This can lead to reduced consumption, as people prefer to save rather than spend.

3. Cost. This reduces the amount of

When interest rates are low, borrowing to buy consumer goods (such as cars or houses) becomes cheaper, which increases consumer spending. The opposite is true when interest rates are high.

4. Money from banks

Low interest rates lead to increased demand for goods and services, which can lead to higher prices, i.e. inflation. On the other hand, higher interest rates can reduce inflation by reducing demand.

5. Cost. This reduces

High interest rates in a particular country may attract foreign investors looking for higher returns on their investments. This leads to increased demand for that country’s currency, which strengthens its exchange rate against other currencies. Conversely, lower interest rates can lead to a weaker currency.

6. Investing in projects

When interest rates rise, the cost of servicing government debt becomes higher, which increases the financial burden on the country. This may prompt governments to reduce spending or increase taxes.

In short, the interest rate is a powerful tool used by governments and central banks to control economic activity. Decisions to raise or lower interest rates directly affect investment, savings, spending, inflation, and the exchange rate, making them a major influence on the economy as a whole.