What is the main purpose of an interest payment? What major factors affect interest rates?
What will be an ideal response?
Interest is the price paid by debtors to creditors for the use of loanable funds or financial capital. It represents the cost of obtaining credit and it compensates the creditors for their loss of current command over resources. Interest rates are affected by such factors as the length of loan, risk of nonrepayment of the loan and handling changes.
You might also like to view...
Which of the following will occur if the Fed buys $10 million of securities from the University National Bank?
A) The Fed will pay by increasing the University National Bank's deposit account with the Fed by $10 million. B) The University National Bank has $10 million more in securities. C) The Fed will pay by decreasing the University National Bank's deposit account with the Fed by $10 million. D) The University National Bank has $10 million less in excess reserves.
Demand-pull inflation is
A) inflation caused by increases in aggregate demand that generate an even larger increase in aggregate supply. B) inflation caused by increases in aggregate demand that are not matched by increases in aggregate supply. C) inflation caused by reductions in short-run aggregate supply. D) inflation caused by reductions in long-run aggregate supply.