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With house prices falling rapidly, it is interesting to examine who loses and who gains.
This kind of question frequently comes up on AQA unit 3 housing market. However, it also makes an interesting macro economic question.
The Impact of Housing Wealth on economy – detailed look at impact of housing wealth on macro economy.
In this video, I have a look at the effect of a cut in interest rates.
I mention 3 reasons why lower interest rates will increase AD and therefore economic growth.
Note: I could have mentioned more. For example, lower interest rates, reduce hot money flows and reduce the value of the exchange rate. A lower exchange rate helps to boost exports and therefore AD.
I also introduced some evaluative points. The effect of a cut in interest rates depends on many variables.
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See also: Explaining lower interest rates
(will get a microphone to improve sound quality, soon)
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