Card 69 / 100: Why does a low interest rate give a "green light" to long production processes?
Answer:
Entrepreneurs must buy inputs first, then sell the output later. The lower the interest rate, the more valuable the future revenue from customers will appear in today's calculations. Therefore, a given process with fixed dollar payments for inputs in the beginning, and a fixed dollar payment by customers at the end, will appear more profitable as the interest rate gets lower and lower.
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