Interst Rates And Economic Factors Flashcards
What is interest rate?
The cost of borrowing money or the reward for saving money, expressed as a percentage
How does a rise in interest rate affect a consumer?
They save more, as extra payment on savings is increased
Spend less, borrowing to buy major items will be more expensive
How does the rise in interest rate affect a business?
Business who borrowed heavily - paying greater sums of interest. - can reduce profit and threaten the business’s survival
Business spending is likely to decrease as the cost of borrowing money rises.
Example- if a business sells a TV to a consumer using loans, they may suffer a fall in sales.
How does fall in interest rate affect a business?
Business spending may increase as the cost of borrowing money is cheaper
What is an overdraft?
A flexible loan which businesses can use, whenever necessary, up to an agreed limit.
What affects does an improving economic climate have on employment levels?
Higher levels of employment in businesses and possibly higher wages .
What affects does a declining economic climate have on employment levels?
Likely to lead to lower levels of employment. Businesses will be selling and producing less products so less employees needed
