1Discuss Chamberlins contribution to monopolistic competitio

1.Discuss Chamberlin\'s contribution to monopolistic competition as a major anteceedence to industrial economics.
2. Discuss Structure Conduct Performance Paradigm.
3. Explain industrial interdependence using Input output analysis

Solution

answer-(1)

There can be both positive and negative impact on the market of a country due to change in interest rates. When the rate at which the banks borrow money is revised by FED, it can have a ripple effect all over the economy.

Impact on spending:-

Due to the existence of the interest rates, the borrowers spend the borrowed money immediately rather than waiting to save the money for the future purchases. When the interest rates are lower, the individuals will be more attracted to borrow more money and spend on buying the products and services. When there is a lesser interest rate on the borrowing, more money remains in their pockets to spend and it can have a ripple impact on the economy as in order to satisfy the increased demand, the business will also expand its production and operations and thus creating more job opportunities, investment and improved productivity in the economy.

While when the interest rates are high, the consumer will spend less and the above-stated impacts will be in reverse order that is a lesser investment, lesser buying, lower job opportunity.

Impact on inflation and recession:-

When the interest rates are quite high, the borrowings will be costly and thus the customers will not have greater demand due to which the prices of the commodities will decrease and this will help in reducing the inflation. While the reverse phenomenon if greater inflation will be observed when the interest rates are lowered resulting in greater expenditures from the customers and raising the prices of the products.

The recession can also be tackled with the interest rates. With lower interest rates, the expenditure from the customers can be boosted and it will increase the aggregate demand causing the business to invest more, buy more resources and thus helping the economy to recover from the recession.

Impact on Stock and Bond Markets:-

The investors will look for those investment opportunities where they can have a greater return in investment, If the interest rates are lower, bond and stock markets seem to be a good option for the investment while the investor will invest in baking deposits if the interest rates high.