economic growth and interest rates

Economic growth refers to the increase in the production of goods and services within a country over a specific period of time. It is often measured by the change in the Gross Domestic Product (GDP). Interest rates, on the other hand, represent the cost of borrowing money or the return on investment. They are typically set by central banks and influence the cost of borrowing for businesses and consumers, as well as the returns on savings and investments. The relationship between economic growth and interest rates is complex. In general, when an economy experiences robust economic growth, it is often associated with higher interest rates. This is because higher economic activity may lead to higher inflation, prompting central banks to raise interest rates to curb inflationary pressures. Conversely, during periods of slower economic growth or recession, central banks may lower interest rates to stimulate borrowing and investment, thereby supporting economic recovery.

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