Posts Tagged ‘thneed’

Inflation and the Prisoner’s Dilemma

01 May

To combat inflation, the reserve bank raises interest rates. Have you ever wondered why? What do interest rates have to do with inflation, after all?

At first glance, you might think raising interest rates should increase inflation. After all, when interest rates go up, zillions of people find their banks charging more interest on their mortgages. So : why do reserve banks raise interest rates to fight inflation?

The answer is surprising.

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