How are lenders and borrowers affected as inflation rates change and they attempt to protect their purchasing?
shelbyy asked:
How are lenders and borrowers affected as inflation rates change and they attempt to protect their purchasing power?
How are lenders and borrowers affected as inflation rates change and they attempt to protect their purchasing power?
Inflation lowers the value of the dollar which weakens the economy but the government can stimulate the economy by lowering interest rates. By lowering the interest rates borrowing and lending is made easier and more appealing. However, this does have repercussions since as we have seen recently…people buy more than they can afford and have their homes foreclosed on. This creates more of a strain on the economy and doesn’t really protect anyone.