Micro and Macro Aspects of Rising Interest Rates | Synoptic Paper 3
- A-Level, IB
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 28 May 2023
This revision video looks at some of the synoptic effects of higher interest rates.
Central banks in many countries including the UK have been raising their main policy interest rates.This is a tightening of monetary policy. It is mainly designed to bring about a period of disinflation by slowing down the growth of aggregate demand. But higher interest rates have both micro and macroeconomic effects.They affect some consumers, firms and industries more than others. Some gain, others lose out when interest rates are rising. This revision video looks at some of the synoptic effects of a period of higher interest rates.
In this synoptic economics video, the focus is on the micro and macro consequences of rising interest rates. The video highlights the recent significant interest rate changes since the global financial crisis and discusses the effects on individuals, households, businesses, and the wider economy. Micro effects include increased borrowing costs for individuals and households with loans, while savers may benefit from higher interest rates. Businesses with debt may face higher debt service costs and reduced investment. Rising interest rates can also impact consumer spending, property prices, and supply chain industries. At the macro level, higher interest rates can help control inflation, increase savings in the banking system, but also negatively affect export industries and pose the risk of recession.