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When borrowing rates rise, both firms and individuals reduce their expenditure. Earnings will decline as a result, as will stock values.
When interest rates fall considerably, however, consumers and corporations will boost spending, leading stock values to climb.
The Federal Reserve manipulates the money supply (M1 and M2) to raise or lower interest rates. The general population keeps money in order to make purchases and store assets.
Money is in high demand as a means of exchange by consumers and companies to purchase goods and services.
Higher interest rates encourage individuals to save money since borrowing costs more, and they also stimulate them to invest. In general, it slows economic activity. Lower interest rates stimulate economic activity and encourage consumers to spend.
Learn more about to federal funds visit here;
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