Investment and economic policies have been recurring themes in IELTS Writing Task 2, appearing in approximately 15% of tests over the past two years. Given the current global economic climate and impact of inflation on personal savings, this topic is likely to remain relevant in future examinations.
Task Analysis
Some people believe that central banks should maintain high interest rates to encourage saving, while others argue that lower rates are better for economic growth. Discuss both views and give your own opinion.
This is a discussion essay requiring candidates to:
- Examine both perspectives on interest rate policies
- Present a balanced analysis
- Provide a clear personal stance
Band 9 Sample Essay
The debate over optimal interest rate policies has significant implications for both individual financial decisions and broader economic outcomes. While high rates can promote saving behavior, lower rates may stimulate economic activity through increased investment and consumption.
Proponents of high interest rates argue that such policies encourage financial prudence and stability. When rates are elevated, individuals receive better returns on their savings accounts and fixed deposits, motivating them to set aside more money for the future. This behavior creates a robust pool of domestic savings that can fund long-term investments and reduce dependence on foreign capital. Moreover, as demonstrated by how global markets influence local investments, higher rates can attract international investors, strengthening the currency and controlling inflation.
However, advocates of lower interest rates contend that economic growth requires affordable access to credit. When borrowing costs are reduced, businesses are more likely to take loans for expansion and innovation. Similarly, consumers find it easier to finance major purchases like homes and vehicles, stimulating various sectors of the economy. This increased economic activity can lead to job creation and higher tax revenues for governments.
In my opinion, while both approaches have merit, a balanced approach that adjusts rates according to economic conditions is most beneficial. During periods of high inflation or excessive speculation, higher rates may be necessary to maintain stability. Conversely, during economic downturns, lower rates can provide crucial stimulus for recovery.
Band 7 Sample Essay
The question of whether interest rates should be kept high or low has become an important topic of discussion in many countries. There are valid arguments for both positions, and this essay will examine them before presenting my view.
Supporting high interest rates, many believe this encourages people to save more money. When banks offer good returns on savings accounts, people are more likely to deposit their money instead of spending it. This creates a culture of saving which can help people prepare for their future needs. Additionally, high rates can help control inflation by reducing spending in the economy.
On the other hand, those favoring low interest rates point to the benefits for economic growth. When rates are low, businesses can borrow money more cheaply to expand their operations or start new projects. This creates more jobs and helps the economy grow. Furthermore, people can more easily buy houses or cars, which supports important industries.
I believe that moderate interest rates are usually best because they balance the needs of savers and borrowers. While very high rates might encourage saving, they can also slow down economic growth too much. Similarly, while very low rates might boost growth, they can lead to excessive borrowing and financial instability.
Key Vocabulary
- Monetary policy (n) /ˈmʌnɪtəri ˈpɒləsi/ – Government or central bank actions that regulate money supply
- Interest rate (n) /ˈɪntrəst reɪt/ – The cost of borrowing money
- Economic stimulus (n) /ˌiːkəˈnɒmɪk ˈstɪmjʊləs/ – Actions taken to encourage economic activity
- Fixed deposits (n) /fɪkst dɪˈpɒzɪts/ – Savings accounts with set terms and rates
- Inflation (n) /ɪnˈfleɪʃn/ – General increase in prices over time
As stock market trends for 2024 indicate continued volatility, similar topics may appear in future IELTS tests. Practice writing essays about economic policies, market regulations, and financial planning to prepare effectively.
Feel free to share your practice essays in the comments section for feedback and improvement suggestions.