<p>Let's consider a simpler example.</p>

<p>You have 10 apples. With that, you can eat <span class="math-container">$x$</span> apples and "invest" in the rest <span class="math-container">$10-x$</span> apples, plant them, and each would yield two apples tomorrow. Let's say that with some optimization, you decided to eat 4 apples, saving the other 6 apples so that you could have 12 apples tomorrow. GDP would grow by 2.</p>

<p>Is this a result of "interest rate"? No. There's not even a bank here.</p>

<p>Now imagine that there <em>is</em> a bank that ask you to deposit your apples there for a day. What would you demand in return? 2 apples tomorrow for every apple you save today. That's the interest rate. The assumption is that the borrower can do something at least <em>as productive</em> with the money he/she borrowed, and the apples would go to those who can most efficiently use them.</p>

CC BY-SA 4.0
2019-05-02T14:07:21.807Z
2019-05-02T14:07:21.807Z
Art
<p>I would like to say the pay back of interest rates in a debt monetary system can only be served with new debts? </p>

<p>Initial state: no money in the system
First step: Bank A is lending the first loan X with interest rates I to company A.
Second step company A is buying productions from Company B at the amount of X.
Third step company B is buy products from company A.
Forth step: Company A is paying back Loan X but it can’t pay interest rates I because in the System was just amount X.</p>

<p>Where does Company A get the interest I. 
In my opinion only through new debts?</p>

CC BY-SA 4.0
2019-05-02T14:22:51.510Z
2019-05-02T14:22:51.510Z
Robert
<p>Are interest rates the cause of economic growth?</p>

<p>For example there is no money in the system and bank a is lending company A a loan Y with X interest.</p>

<p>how can company A pay back the loan Y with interest X when the system is just loaded with loan Y? </p>

<p>My conclusion is the Loan Y can only be paid back with interest when the economic is growing by other loans? </p>

CC BY-SA 4.0
2019-05-04T16:43:33.193Z
Duplicate of this question?: https://economics.stackexchange.com/questions/8318/how-is-the-interest-on-fractional-reserve-money-creation-paid
Mick
<macroeconomics>
Interest rates and economic growth
Robert
# Interest rates and economic growth

(Asked by: username_0 on 2019-05-02)

Are interest rates the cause of economic growth?

For example there is no money in the system and bank a is lending company A a loan Y with X interest.

how can company A pay back the loan Y with interest X when the system is just loaded with loan Y?

My conclusion is the Loan Y can only be paid back with interest when the economic is growing by other loans?

**Tags:** macroeconomics

> **Comments:**
> **username_1**: Duplicate of this question?: https://economics.stackexchange.com/questions/8318/how-is-the-interest-on-fractional-reserve-money-creation-paid  

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## 2 answers

### Answer by username_2 on 2019-05-02. Score: 2

Let's consider a simpler example.

You have 10 apples. With that, you can eat $x$ apples and "invest" in the rest $10-x$ apples, plant them, and each would yield two apples tomorrow. Let's say that with some optimization, you decided to eat 4 apples, saving the other 6 apples so that you could have 12 apples tomorrow. GDP would grow by 2.

Is this a result of "interest rate"? No. There's not even a bank here.

Now imagine that there *is* a bank that ask you to deposit your apples there for a day. What would you demand in return? 2 apples tomorrow for every apple you save today. That's the interest rate. The assumption is that the borrower can do something at least *as productive* with the money he/she borrowed, and the apples would go to those who can most efficiently use them.


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### Answer by username_0 on 2019-05-02. Score: -1

I would like to say the pay back of interest rates in a debt monetary system can only be served with new debts?

Initial state: no money in the system
First step: Bank A is lending the first loan X with interest rates I to company A.
Second step company A is buying productions from Company B at the amount of X.
Third step company B is buy products from company A.
Forth step: Company A is paying back Loan X but it can’t pay interest rates I because in the System was just amount X.

Where does Company A get the interest I.
In my opinion only through new debts?


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