influences on business Flashcards
what is an interest rate
The interest rate represents the cost of borrowing money or the amount a saver receives in interest.
Usually stated as a percentage, the rate reflects how much is earned or paid in interest.
how does an increase in interest rates affect savers?
Will receive more interest on their savings. This will encourage them to spend less so that they can save more.
how does a decrease in interest rates affect savers?
Will receive less interest on their savings. This will discourage them from saving, so they may spend their money instead.
how will an increase in interest rates affect borrowers?
Will have to pay more back for money that is borrowed. This will discourage them from borrowing.
how will a decrease in interest rates affect borrowers?
Will have to pay less back for money that is borrowed. This will encourage them to borrow more money to spend.
how do you calculate interest?
total repayment-borrowed amount= interest
