Answered: How can market forces of supply and…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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How can market forces of supply and demand affect interest rates and the economy?

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The demand and supply affect interest rates in the money market. The money market is the market that describes the demand and supply for money in a country. The demand shows the quantity of money demanded in the economy whereas supply shows the quantity of money supplied in the economy. A rate of interest is the cost of borrowing money and the contrary is also the compensation for the risk of lending money. The level of interest rates always keeps on changing. One of the factors that affect interest rates is supply and demand in the economy.

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