Understanding Money and Banking Essay Example | Topics and Well Written Essays - 500 words

Understanding Money and Banking - Essay ExampleTo use money requires make up and a person or business entity that needs and uses the similar for the acquisition of good and services has to accept interest based on prevailing market consider. Another concept is the price of goods and services, expressed in currencies, which must be understood as the value of these goods and services when they atomic number 18 breakd in the market. Inflation rate is about rate of price increase as measured by price index and is commonly measured yearly or monthly and erodes purchasing power of money (Eyler, 2009). It is important to know the same since the higher the inflation rate the higher would be the prices of goods and services and the harder for one who needs money to acquire the goods and services required for consumption or business purposes. High inflation rate would therefore normally be related to higher interest rate, which can be influenced or controlled by monetary governing as w ay of arresting increase in prices or inflation for general welfare.In the article, the bankers are demanding that the monetary authorities or the policy makers should allow interest rates to go up as former blames the low level of interest rates to be causing inflation or the act increase in the prices of commodities. Krugman author has US economic slowdown or low economic convalescence development in mind with high unemployment in the United States, which is a problem that must be addressed. He argues that increasing interest rate would mean accepting unemployment as permanent reality or accepting hardship without having in solution in the offing. To increase interest rate would be to reprove business borrowing from banks and tight monetary supply could in fact reduce inflation, which is also no-good for the economy, but the greater evil of more unemployment would arise as consequence.Arguments used to justify increasing