The decrease in deposit interest rate means that the income of existing banks will be less, and investors may take out their money for other investments or for consumption. Promote consumption and currency circulation.
The decrease of loan interest rate means that the interest to be paid for borrowing money from banks is less, which reduces the financing cost of enterprises, promotes enterprise expansion, promotes employment and promotes economic development.
the rise or fall of interest rate has both advantages and disadvantages, and the impact is large and small.
interest rate refers to the ratio of the interest amount due in each period to the par value in the amount borrowed, deposited or borrowed (called the total principal). The total interest of the lent or borrowed amount depends on the total principal, interest rate, frequency of compound interest, and the length of time of lending, deposit or borrowing. Interest rate is the price that the borrower needs to pay for the money he borrows, and it is also the return that the lender gets by delaying his consumption and lending it to the borrower. The interest rate is usually calculated as a percentage of one-year interest to principal.
generally speaking, interest rates are expressed by annual interest rate, monthly interest rate and daily interest rate, depending on the term standard of measurement.
in modern economy, interest rate, as the price of capital, is not only restricted by many factors in the economic society, but also the change of interest rate has a great impact on the whole economy.
Therefore, modern economists pay special attention to the relationship between various variables and the balance of the whole economy when studying the determination of interest rate. The theory of interest rate determination has also experienced classical interest rate theory, Keynesian interest rate theory, loanable funds interest rate theory, IS-LM interest rate analysis and contemporary dynamic interest rate model.
Keynes thought that savings and investment are two interdependent variables, not two independent variables.
In his theory, the money supply is controlled by the central bank and is an exogenous variable with no interest rate elasticity. At this time, money demand depends on people's psychological "liquidity preference".
loanable funds's interest rate theory is the interest rate theory of neoclassical school, which was put forward to revise Keynes's "liquidity preference" interest rate theory. To some extent, loanable funds's interest rate theory can actually be regarded as a synthesis of classical interest rate theory and Keynesian theory.
Hicks, a famous British economist, and others think that the above theory does not consider the income factor, so it is impossible to determine the interest rate level, so in 1937, the IS-LM model based on the general equilibrium theory was put forward. Thus, a theory that interest rate and income are determined at the same time under the interaction of savings and investment, money supply and money demand is established.