economic response to rising material prices?

Question

as the price of raw materials such as oil steel and copper increase, then firms which use these goods in order to make goods will shorley have to increase there prices, resulting in inflation, 

there is a minimum cost for producing good and if that cost increases how could raising intrest rates reduce inflation assuming firms cannot absorb all of the increases costs.

karl_obezyanka · Accepted Answer

Two ways. 

1) First, rising interest rates will cause prices in other industries to slow, which offsets some of the raw materials price increase leaving average inflation lower.

2) Higher interests will mean less construction. Construction is one of the major users of raw materials. Less construction means less demand, and hence a lower price.

In fact, the price of these materials is rising because construction is increasing so rapidly in China. The Chinese government is already raising interest rates to slow construction there.

Matt · Answer

Increasing interest rate will cause the economy will slow and
consumption of materials to fall, which will bring material prices down.  Companies will have some down quarters and will have to slim down with possible layoffs during this time.

Glen H · Answer

Recycle, grow your own veggies and go buy a lamb, two chickens and a cow.

If you live in an apartment building its going to be cozy!

? · Answer

B) the mixture furnish curve will shift to the spectacular extra suited technologies will make production quicker, extra straightforward, and maximum severely extra much less costly. as a effect furnish will strengthen. *for extra help e mail my username

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economic response to rising material prices?

4 Answers