Topic 8
There are 2 types of interest rate, what are they?
APR
EAR
What is APR, AER and EAR?
APR
EAR
AER
the interest rate that would be paid
on a savings account if you were to leave the money in the account for a full year
– the interest that would be charged
on a sum borrowed over one full year
a measure traditionally only used for over drafts only
here are 2 main causes of inflation. What are they?
Demand–pull inflation arises when there is an increased
demand for goods and services, but the supply cannot keep up
Cost–push inflation arises when businesses have to pay
What are the good and bad features of low interest rates?
High intrest rates
Low intrest rates
Good
bad
Good
Bad
However, high interest rates make borrowing very expensive,so if you have already borrowed money, your repayments might increase and you will be less likely to borrow more.
High interest rates reward savers by giving a high return on any money
deposited.
Low interest rates also mean that borrowing is cheap,
so more people borrow money to spend.
Low interest rates mean that saving money is less attractive, so people
spend it instead. which could lead to losing it
Give 4 features of inflation.
Inflation over time
High inflation reduces real income
inflation affects benifits payments and pay increases
inflation influences intrest rates
Give 3 features of interest rates.
It changes over time.
It rewards savings.
It is the cost of borrowing and is used to work out repayments.