According to the interest rate is like the price of money, understand this relationship according to its supply and demand principle! Of course, interest rates will also be subject to government intervention.
1. In terms of deposits, the money supply increases, the liquidity increases, and more money is used for savings. The cost pressure on banks to lend money to depositors is reduced, so the interest rate is reduced. On the contrary, the money supply has decreased, and the money used for saving has also decreased accordingly. The pressure on banks to borrow money has increased, which will raise interest rates.
In terms of investment, if there is more money supply, liquidity will increase, the cost of borrowing money from banks will decrease, and the loan interest rate will decrease. On the contrary, if the money supply is less, the cost of absorbing deposits will increase and the interest rate will increase accordingly.
2. According to Keynes's theory, speculative demand is mainly related to the interest rate in the money market. The lower the interest rate, the more speculative money is needed. Therefore, speculative money demand is a decreasing function of interest rate. Generally speaking, the higher the interest rate, the less people who need money are willing to lend, because the cost increases and the demand for money is less, which is a negative correlation.
Extended data:
The average interest rate of loans is influenced by the composition of high-interest loans and low-interest loans. If the proportion of high-interest loans is significant, the average interest rate of loans will be high; On the contrary, the average interest rate of loans is low.
Money market refers to the market where financial assets are traded within one year. The main function of the market is to maintain the liquidity of financial assets in order to convert them into currencies that can be circulated at any time.
Its existence, on the one hand, meets the borrower's short-term capital demand, on the other hand, it finds a way out for temporarily idle funds. Money market generally refers to the trading market of short-term credit instruments such as treasury bills, commercial bills, bank acceptance bills, negotiable certificates of deposit and repurchase agreements.
As far as its structure is concerned, the money market includes interbank lending market, bill discount market, treasury bill market, securities repurchase market, large negotiable certificates of deposit and so on.
Fixed interest rate and floating interest rate have their own advantages and disadvantages.
Long-term loan interest rate and short-term loan interest rate: according to the loan term, loan interest rate can be divided into long-term loan interest rate and short-term loan interest rate, and long-term interest rate is the symmetry of short-term interest rate.
It refers to the interest rates of various financial assets with a financing period of more than one year, such as various medium and long-term bond interest rates and various medium and long-term loan interest rates, which are the interest rates in the capital market.
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