Raising interest rates increases unemployment?

I don%26#039;t understand why raising interest rates increases unemployment! Can someone please explain?

Raising interest rates increases unemployment?inflation rate

Raising interest rates discourages people from expanding and or starting businesses and developing real estate, expensive investments become less profitable, and so fewer job opportunities become available during that time, while more and more people come of working age.

Raising interest rates increases unemployment? loan

two reasons 1) more money spent by a company on interest means less profit available to pay employees 2) money money spent by consumers on interest means less disposable income to pay for goods %26amp; services, and less goods %26amp; services means less jobs|||For just understanding, use two small cases. Case One. Interest rate is raised. The companies find that their cost of working capital is now higher. They want to pass on the extra cost by raising prices. But consumers buy less at higher prices. To produce lower quantities demanded, the producers require fewer labour. So they retrench some labour and unemployment increases. Case TWo: You wanted to set up a manufacturing plant for producing X. With interest rate higher now, your opprtunity cost of capital to be invested in buying machinery will now be higher. Your capital cost being higher, your willingness to take risk on investing a new project will decline. You may decide to drop the idea to invest in the project. That would mean employment will not increase at the rate it would have if interest rates were lower. There are several ways rise in interest rates may affect employment opprtunities adversely. But many other things also happen in an economy when interest rates rise. So, emoirically one cannot always say that now that the interests have risen, unemployment will increase. The short-term interest rates increased in the US at a slow pace but substantially over three successive years, but employment has continued to increase. Maybe, had the interest rates not been raised, emplyment may have increased faster.