I'm not an economist, but the last time interest rates went down, my mortgage dropped $300 a month when I refinanced.
Would that be an example of resulting lower prices, Milton Flogtard?
Not really because you have a lower
cost but it doesn't affect the
price, unless you go to sell it.
Under Keynesian economic theory, which is the only economic theory that Liberals like Milton Von Flogstain understand because it involves government control, higher interest rates should result in lower prices. Things cost more so demand goes down, thus leading to a decrease in price. But like I said earlier,
price and
cost are not the same thing.
There are other variables that affect price besides supply and demand, including demographics, seasonality, availability of substitutes, and especially the cost of inputs.
For example houses are expensive not because of interest rates, but mostly due to the cost of inputs, namely materials and labor cost, plus supply and demand.
Liberals:
"We need more affordable housing!"
Okay fine, except the cost of inputs like labor, materials, permits, etc. are so high that in many parts of the country you can't build a house that sells for less than $750,000 or more.
Corporations borrow money too, so if interest rates are low then their cost of doing business is less, so they can conceivably charge less, but again, there are a lot of factors.
Keynesian economics looks good on paper but doesn't work well in real life, it is
always inflationary.
Recession:
Lower interest rates and increase government spending to stimulate demand and employment.
Inflation:
Raise interest rates so things cost more to reduce demand and cut government spending to put downward pressure on prices. The problem with this is that 1) government never really spends less because they like to buy votes and 2) that doesn't affect the input costs so it doesn't affect prices as much as the Keynesians would like.
I buy into the Milton Friedman Chicago School of Economics theory, where you increase the money supply at a steady 4% a year so the economy can grow but also businesses like predictability to better make long-range plans and not get whipsawed every four or eight years with a change in party in the White House.
Not trying to write a whole thesis on economics, did that a few times in my life already, but I hope my Reader's Digest version helps.