Matori

beatthecfa Wrote:
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> Generally speading, in an expansion, interest
> rates are relatively low. If there is a fear of
> the economy overheating, then interest rates are
> raised to 'cool down' the economy and decrease
> aggregate demand (lower consumption and investment
> expenditure)
>
> In a recession, interest rates believed to be too
> high. Therefore, interest rates are reduced to
> 'stimulate' the economy and boost aggregate demand
> (increase consumption and investment expenditure)

I understand the explanation above and what drives interest rates with regards to expansion and recessions.. but how does that relate to inflation?