BY: Sarfraz Khan Tareen 1225170

BY : Sarfraz Khan Tareen
1225170
Interest rate is a tool of Central banks to

control economic growth. The policies based
on interest rate can be of two types:
Expansionary
Monetary Policy.
Contractionary
Monetary Policy.
Impact of interest rate on Economic Growth.

Central Bank
Effect
Savings
Investment
Circulation of Money
Economy
Increase in
interest rate
Increase in
savings
Decrease in
Investment
Decrease in
Circulation
Low Economic
Growth
Decrease in
interest rate
Decrease in
savings
Increase in
Investment
Increase in
Circulation
High Economic
Growth
Interest Rate
Year
Interest Rates
USA
EU Zone
China
Japan
India
Pakistan
2005
2.25
5.58
0.25
6.25
2006
5.25
3.25
6.12
0.25
9.5
2007
4.25
7.29
0.5
10
2008
0.25
2.5
5.31
0.1
15
2009
0.25
5.31
0.1
4.25
12.5
2010
0.25
5.56
6.25
14
2011
0.25
5.56
8.5
12
2012
0.25
0.75
10
Average
Rate
1.84
1.97
5.84
0.15
6.66
11.50
Year
GDP Growth Rates
USA
EU Zone
China
Japan
India
Pakistan
2005
3.1
11.3
1.3
9.3
7.7
2006
2.7
3.3
12.7
1.7
9.3
6.2
2007
1.9
3.2
14.2
2.2
9.8
5.7
2008
-0.4
0.3
9.6
-1
3.9
1.6
2009
-3.5
-4.4
9.2
-5.5
8.2
3.6
2010
2.1
10.4
4.4
9.6
4.1
2011
1.7
1.5
9.3
-0.7
6.9
2.4
2012
1.3
0.4
7.4
3.2
5.5
3.67
Average
Rate
1.23
1.05
10.51
0.70
7.81
4.37
USA
Interest Rate VS GDP Growth Rate
6
5.25
5
4
4.25
4
3.1
2.7
1.9
RATE
1.7
1.3
1
0.25
0.25
0.25
0.25
0.25
0
2005
-1
2006
2007
2008
-0.4
2009
-2
-3
-4
-3.5
YEAR
2010
2011
2012
Interest Rate
GDP Growth Rate
Trend Line
EU Zone
6
4
3.253.3
2.25
2
3.2
2.5
2.1
1.5
RATE
0.3
0.75
0.4
Interest Rate
0
2005
2006
2007
2008
2009
2010
2011
2012
GDP Growth Rate

Trend Line
-2
-4
-4.4
-6
YEAR
China
16
14.2
14
12.7
12
11.3
10.4
9.6
RATE
10
9.3
9.2
7.4
7.29
Interest Rate
GDP Growth Rate
6.12
6
5.58
5.31
5.31
5.56
5.56
0
2005
2006
2007
2008
2009
YEAR
2010
2011
2012
Trend Line
Japan
6
4.4
4
3.2
2.2
1.7
RATE
1.3
0.25
0.25
0.5
0.1
0.1
0
2005
2006
2007
2008
2009
-2
-4
-5.5
YEAR
2010
2011
2012
-0.7
-1
-6
Interest Rate
GDP Growth Rate
Trend Line
India
12
10
9.8
9.3
9.6
9.3
8.5
8.2
RATE
6.25
6.9
6.25
5.5
Interest Rate
GDP Growth Rate
3.9
Trend Line
4.25
0
2005
2006
2007
2008
2009
YEAR
2010
2011
2012
Pakistan
16
15
14
14
12.5
12
12
10
RATE
9
8
10
9.5
10
7.7
Interest Rate
6.2
GDP Growth Rate

Trend Line
5.7
3.6
4.1
3.67
2.4
1.6
0
2005
2006
2007
2008
2009
YEAR
2010
2011
2012
16
14
12
USA
10
EU Zone
China
Japan
6
India
Pakistan
4
2
0
2005
2006
2007
2008
2009
2010
2011
2012
20
15
10
USA
EU Zone
China
Japan
India
Pakistan
0
2005
-5
-10
2006
2007
2008
2009
2010
2011
2012
14.00
11.50
12.00
10.51
10.00
7.81
8.00
6.66
5.84
6.00
4.37
4.00
2.00
1.84
1.97
1.23
1.05
0.15
0.70
0.00
USA
EU Zone
China
Interest Rates
Japan
GDP Growth Rates
India
Pakistan
Impact of interest rate on Economic Growth.

Central Bank
Effect
Savings
Investment
Circulation of Money
Economy
Increase in
interest rate
Increase in
savings
Decrease in
Investment
Decrease in
Circulation
Low Economic
Growth
Decrease in
interest rate
Decrease in
savings
Increase in
Investment
Increase in
Circulation
High Economic
Growth
Increase In
Government
Borrowings
Used to pay
expanses
Unproductive
use of capital
Interest Rate
High Inflation &

Low Economic
Growth
Increase in
Debt
Increase in
Liability

BY: Sarfraz Khan Tareen 1225170

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BY: Sarfraz Khan Tareen 1225170

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BY : Sarfraz Khan Tareen

Interest rate is a tool of Central banks to

Impact of interest rate on Economic Growth.

GDP Growth Rates

GDP Growth Rate

GDP Growth Rate

Impact of interest rate on Economic Growth.

High Inflation &

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