The Economics and Information of Interest
With a basic understanding of interest rates, we can tease out some important implications and glean additional information about the general state of economic activity. Despite the simple examples of Chapter 3, interest rates are rarely constant for long periods of time; they can change daily, by the hour, and by the nanosecond. We now focus on why such changes occur and what they mean.
Interest Rates Are More Than Indicators of Time Preference
Interest rates are important sources of information not just about the value of financial assets, but about the state of economic activity. That is, by looking at changes in interest rates, you should be able to explain why those changes occurred and ...
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