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LogoutWhen the economy is in need of a boost, authorities attempt to decrease borrowing rates, therefore encouraging companies and consumers to spend more. Saving becomes unfavorable when the Federal Reserve (Fed) lowers interest rates, and the expansion phase starts. Money is freely flowing through the economy, businesses are taking out loans to expand, employment prospects are improving, and consumer spending is skyrocketing.
Inflation will eventually grow as a result of the cheap money flow and consequent increase in expenditure, prompting central banks to raise interest rates. Suddenly, the focus is on persuading individuals to cut back on their spending and slow down the economy. Revenues are down, stock values are down, and the economy is contracting once more.