Answer to Question #139835 in Microeconomics for lesego

Question

Higher interest rates to combat inflation and inflation targets are often criticized of
suppressing development and lowering the quality of life of many people. It is for this
reason that trade unions often oppose to inflation targets and the traditional
measures to achieve this. Are all these arguments true and relevant? Evaluate and
discuss this critically?500-600 words

Answer 1

It's true that higher interest rates will cool the economy, because the availability of cheap loans for people and business will decrease. But this is temporary result until the inflation target is reached.