3.2.1-Introduction to the national economy Flashcards
What are interest rates?
The cost of borrowing and the reward for saving
What is the Annual Equivalent Rate (AER)
The interest rate on savings, with annual compound interest added on
What are some examples of different interest rates?
- Savings rates
- Bank loans
- Mortgages
- Credit card rates
- Payday loans
- Corporate bonds
- Government bonds
Who sets the interest rates in the UK?
The Monetary Policy Committee
What are factors that influence the different rates of interest?
- Amount of money
- Duration
- Wealth
- Risk
- Who
- Income
How will rising interest rates impact consumers?
- Consumers will be encouraged to save more
- Consumers are less likely to take out loans
- Consumers are likely to invest less
- Consumers are likely to spend less
How will rising interest rates impact producers?
- Producers are likely to save more
- Producers are less likely to take out loans
- Producers are less likely to invest
How will falling interest rates impact consumers?
- Consumers will save less
- Consumers are more likely to take out loans
- Consumers are more likely to invest
- Consumers are more likely to spend more
How will falling interest rates impact producers?
- Producers will save less
- Producers are more likely to take out loans
- Producers are more likely to invest
What influences how people spend?
- Future expectations
- The economic outlook
- Cost of capital goods
- Technological changes
What is austerity?
Official action by a government to cut their spending or spending by consumers
What is direct taxation?
A tax directly from income, such as income or corporation tax
What is Government revenue?
Money governments collects from mostly taxation
What is indirect taxation?
A tax on a good or service
What are progressive taxes?
Taxes that take a higher percentage of income from higher earners
