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Question
I read about quantitive easing that Inflationary risks are mitigated if the system's economy outgrows the pace of the increase of the money supply from the easing. If production in an economy increases because of the increased money supply, the value of a unit of currency may also increase, even though there is more currency available, my question is : do interest rates also increase ? if so is that good for economy ? (if dollar increase in value and interest rates )

Answer
Thanks for the question!

Interest rates management is actually managed in a planned an intentional way by the federal reserve, which controls something called the federal funds rate, which is the rate at which other banks borrow from the federal reserve.  By changing this rate, it influences other interest rates because banks will try to maintain a specific margin of differential between their loans and their debts.  In other words, banks will give loans at a higher interest rate than they borrow money so that they make a profit, so the rate at which they borrow money will influence the rate at which they lend money.

To answer your question, interest rates will not necessarily increase.  It might be good economic policy to increase interest rates, but there is nothing saying that MUST rise.  That being said, during economic growth, it is frequently good economic policy to increase interest rates in order to control anticipated debt growth and inflationary rates during the coming boom-cycle.

I hope that answers your question.

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Michael Taillard

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Accepts most economic questions

Experience

Economic Consulting: American Red Cross; US Strategic Command -- Economics Lecturing: Bellevue University (Bellevue, NE) Huijia College (Beijing), OPII Schools (Omaha), Madonna University (Livonia), Schoolcraft College (Livonia), ZomBCon (Seattle), Zombiefest (Lincoln) -- Media Appearances: Dead Man Working (2012 Movie documentary), The Heartland News (Omaha local news outlet)

Organizations
American Economics Association, Business Networks International, Midwest Writer's Guild, Zombie Research Society

Publications
Economics and Modern Warfare: The Invisible Fist of the Market (Palgrave Macmillan) -- 101 Things Everyone Should Know about Global Economics (Adams Media) -- Corporate Finance for Dummies (Wiley) -- Psychology and Modern Warfare (Palgrave Macmillan) -- Analytics and Modern Warfare (Palgrave Macmillan)

Education/Credentials
PhD (Financial Economics; honors) -- MBA (International Business Finance; honors) -- Grad School Certificate (International Business Management; honors) -- BS (International Business Economics; honors) -- AA (Business Administration; honors) -- Certificate (Chinese Language and Culture) -- Trade School (Transportation Logistics; honors)

Awards and Honors
Philanthropy awards and nominations for the OPII Schools economic experiment

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