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when banks have more liquidity in their net. every bank have have to reduce their lending rates in order to attracting their credit-worthy customers
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Why interest rate has no affect on the aggregate demand?
The interest rate does affect aggregate demand. As the interest rate falls, aggregate demand increases and vice-versa.
Does the federal government influence interest rates?
The Federal Reserve, which is a part of the federal government, sets the Prime Rate, which is a rate which banks loan to each other and also the rate at which banks can borrow from the federal government. This prime rate, in turn, affects the interest rates which consumers pay for loans.
What does the nominal interest rate mean?
A nominal interest rate is an interest rate that does not factor in the rate on inflation. Nominal interest rate could also refer to an interest rate that does not adjust for the full effect of compounding.
How does the real interest rate relate to the nominal interest rate?
A real interest rate and a nominal interest rate are quite similar. The only real difference between the two interest rates are that a nominal interest rate include the cost of inflation where as the real interest rate does not.
What does effective interest rate mean?
An effective annual interest rate considers compounding. When the principle is compounded multiple times each year the interest rate increased to be more than the stated interest rate. The increased interest rate is the effective annual interest rate.
When the rate of interest falls the demand for capital?
When the rate of interest falls the demand for capital increases because it is cheaper to borrow money.
How much do I have to pay back in interest if I take a loan out on my 401K?
The interest rate really depends on what the prime lending rate is. As the interest rate is the prime lending rate plus an additional percentage point or two.
What is the prime interest rate?
The "Prime Interest Rate" is the interest rate used by banks to base all their loan interest rates (and sometimes other interest rates) on and is usually lower than the lowest rate charged on loans to customers with the best credit ratings.
Is LIBOR normally higher or lower than the US prime interest rate?
It is normally higher than the US prime interest rate.
What is the prime interest rate and how does the average bank customer fare in regard to the prime interest rate?
The prime rate is the rate that a bank charges its most creditworthy customers. The average customer can expect to pay one or two percent (or more) above prime.
Why interest rate has no affect on the aggregate demand?
The interest rate does affect aggregate demand. As the interest rate falls, aggregate demand increases and vice-versa.
What are the two different types of interest rates?
A fixed rate has the same rate of interest the entire life of the loan. A fluctuating rate varies with the prime interest rate.
What is the lowest interest rate banks can offer called?
Prime Rate -A+
Prime rate?
interest rate banks charge their best customers
What does prime rate refer to in the Canada mortgage market?
The Canadian prime rate refers to the rate a which lending companies such as banks charge their preferred customers. They do this because these customers are seen to have the least amount of risk.
What is the lowest interest rate charged by banks to preferred customers?
Prime rate
How does your bank know the prime interest rate?
Your bank will know the prime interest rate (also known as the "United States Prime rate" in the same manner that it becomes known to other banks. The rate is determined by the Wall Street Journal based on polling the nations top 10 banks. The rate is updated when at least 7 of the 10 banks change their interest rates. The rates are a composite of these top banks and the "prime interest rate" is published in the Wall Street Journal.
