How does the interest rate go up in the expansive fiscal policy?

What do the macroeconomical factors have to do for the interest rate and the investments to go up when using the expansive fiscal policy?


Thanks!!|||ask in plan english next time.


interest rates are tied to the demand put on banks to borrow money for business loans, home loans and the backing by the FDIC. the federal reserve chairman makes recommendations to the president after he reviews economic indicators. if the economy slows he recommends lowering the interest rate if the economy is growing too fast he recommends raising the interest rate. federal reserve chairman wants a slow steady growth so interest rates stay attractive for those in business needing additional cash to expand their business and for home buyers to buy a house.


investments have some relation to interest rates as it costs more to do business. produce companies borrow to plant a crop: corn, soy beans, potatoes,.. then when the crops are ready to sell the pay back the loan. so the interest takes part of the profit from the sale of these goods. that is why the stock market reacts to interest rate news.


is "expansive fiscal policy" your term for obama spending more money then the government brings in with taxes? if so he will destroy the credit markets and cause inflation with high interest rates. borrowing excessively puts too much money into circulation devaluing the dollar and making it worth less than a dollar to other countries we trade with. it hurts americas economy and makes america vulnerable to even harder times as more companies go out of business.