What is the impact of high and low interest rates by rbi on inflation
Central banks Increases interest rates to control inflation. Higher interest charged on loans, Companies and Employers on top of the pyramid stops borrowing. Less flow of money down the pyramid in to the hands of the employees and workers at the bottom of the pyramid. When there is less money, people spend less. price of products and services come down gradually.
Central banks reduces interest rates to jumpstart slowing down economy. Lower interest charged on loans, Companies and Employers on top of the pyramid starts borrowing. More employment opportunity, Increases the flow of money down the pyramid, leads to spending at all levels. Leads to increase in GDP.
Would any of these conditions have direct influence of foreign investments in India?