Higher interest rates, more capital invested

Higher rates generate wonderful results since there is more room for investment aiming at the goal. The scenario happened in U.S.A back in 2008 where it bolstered the economic growth thereby; the nation was able to fight back the global financial crisis. In a situation where investors receive more capitals they are easily able to accept lower earnings on the stock thus; allowing low rates of borrowing (Moskowitz, 2014).

Low interest rates, low capital invested

USA experienced low rates in 2009 where the cut was around 0.6% thereby; there was a prediction that the rates were to remain constant over a long period. Low interest rate is an important scenario for every individual especially the homeowners who are paying inconstant mortgage. With lower interest rates rent tend to lower since they are the largest component on land owners. On the other hand the scenario affected the asset prices as well as shares where the economic growth was affected abundantly (Baumol & Blinder, 2009).

Low interest rates, more capital invested

This scenario is the best for government to invest because all the investment finance through borrowing generates an attractive nature. Low interest rates give better results of borrowing where the return becomes lower as compared to the situation of higher interest rates. Despite the benefits of investment on low rates interest there some individuals loose effectively. Back in 2005 the US baking rates were affected due to lower interest rates since commercial back offers better rates for savers whom in such situations face huge loss (Moskowitz, 2014)..

Higher interest rates less capital invested

Interest rates can have both positive as well as negative effects on the U.S.A economy especially where the government takes action in changing the bank borrowing rates. High interest rates with low capital invested occur in a situation of loan borrowings thus, a disappointment to the borrower because he might not be able to pay the loan. 1982 is a good example when the scenario affected U.S.A through inflation which caused depression since the interest rate raised from 15% to over 20% (Baumol & Blinder, 2009).

References

Moskowitz, J. S. (2014). The 16% solution: How to get high interest rates in a low interest world with tax lien certificates. Kansas City, Mo: Andrews and McMeel.

Baumol, W. J., & Blinder, A. S. (2009). Economics: Principles and policy. Mason, OH: South-Western/Cengage Learning.