Writing Assignment 3 Essay Example | Topics and Well Written Essays - 250 words

Writing Assignment 3 - Essay Examples necessitate the cost incurred by the investor/borrower whereby, the borrower pays back the principle amount and additional cost for borrowing ( enkindle rates). Therefore, an increase in market interest rates influences incentives to invest in numerous ways. For example, it makes the cost of borrowing to an investor to increase and hence, reject borrowing and investment. Further, increase in market interest rates causes the aggregate demand to shrink which hike up discourage spending and investments. In addition, higher interest rates may leads to higher monthly payments on mortgages. This reduces consumers levels of disposable income making it difficult for consumers to energise something to invest. Therefore, however, it move be observed that higher interest rates discourage investment as it increases the cost of accessing loans. This influences incentives to invest (DSouza, 2008).Based on the above model, it can be observed that large gov ernment budget deficits year after year will have an impact on the equilibrium interest rate. This is because large government deficit causes the amount of loanable funds supplied to be below the equilibrium point. This means that the quantity of loanable funds demanded will be higher than quantity supplied. This in turn causes an automatic increase in interest rates (DSouza, 2008).4). The reason why McKinsey Global make up conclude that long-term fiscal sustainability is important for economic increase is because long-term fiscal sustainability helps to pull together required amount of financial resources that may be utilized for investments and establishing long term economic growth (DSouza, 2008).Coombs, G., & South Australian shopping centre for Economic Studies. (2001). Essays on regional economic development. Rundle Mall, SA, Australia South Australia Centre for Economic Studies in association with Wakefield