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How does inflation help explain why banks charge interests on loans?
Wiki User
∙ 12y ago
If I understand you correctly, you want to know the relationship between interest rates and inflation. There are many factors that go into these decisions, but to keep it simple, when inflation is higher than desired, the Federal Reserve will raise interest rates. Higher interest rates decrease the amount of borrowing and increase the amount of savings. This decreases the monetary supply, and less money flowing through the economy will decrease the inflation rate. All you really have to understand is inflation. If everyone acquires too much money, that money will be worth less than it was in the past, thereby causing retailers, etc. to raise prices.
Wiki User
∙ 12y ago
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Who determines interest rate in banks?
inflation
How do banks manage inflation?
you hedge against it
Explain why banks must balance profit and security when making loans?
Banks must balance security and profit when making loans because loan interests are partially how banks make their money. They must take appropriate security measures to ensure customers keep returning.
Do all US banks now charge a fee for providing one with foreign currency?
Not all Banks charge for foreign currency, but most of the larger national banks do charge.
Do banks charge fees for direct debit?
Most banks do not charge any fees for direct debit transactions. Banks who do not charge these fees include most credit unions, Chase, and Bank of America.
When banks make loans they put more money into the economy. This increases the?
When banks give out loans, there is an increase in the money circulation. This usually increases the rate of inflation and needs to be checked by the body in charge of monetary policy.
When banks make loans they put more money into the economy This increases the?
When banks give out loans, there is an increase in the money circulation. This usually increases the rate of inflation and needs to be checked by the body in charge of monetary policy.
Who determines interest rate in banks?
inflation
How do banks manage inflation?
you hedge against it
What is a dividend of zero?
In these days of less inflation, deposits in several banks may be zero or even negative. i.e. there is no interest paid, or in the case of some Swiss banks, they actually charge you for keeping your money!
What is the effect of a raise in discount rates?
Discount rate = inflation expectation + risk premium for the investment, so when inflation goes up, your discount rate should go up
Explain why banks must balance profit and security when making loans?
Banks must balance security and profit when making loans because loan interests are partially how banks make their money. They must take appropriate security measures to ensure customers keep returning.
What is the definition of kibor Karachi inter bank offer rate?
KIBOR is stand for "The Karachi inter-bank offered rate" which is used by the banks in order to lend the money with each others and with their customers. This is the minimum interest rate (inflation adjusted) which the banks have to charge from their customers.
Do all US banks now charge a fee for providing one with foreign currency?
Not all Banks charge for foreign currency, but most of the larger national banks do charge.
Do banks charge fees for direct debit?
Most banks do not charge any fees for direct debit transactions. Banks who do not charge these fees include most credit unions, Chase, and Bank of America.
You are planning to run your own business you are looking for a financerplease suggest some of the financer?
If you need finance for your business, I'll say try with local banks, don't go to popular banks like citibank, Barclay's etc they will charge you huge amount of interests.. go to small banks, you will get good deal for your business loan
What is KIBOR rate in Pakistan?
It is Karachi Inter Bank Offer Rate (KIBOR), given by specialized institution on daily, weekly, monthly and on 1, 2 and 3 yearly basis to all the commercial banks of Pakistan so that they charge interest to their customers on that basis. This rate is inflation adjusted rate and then banks by adding 2 or 3% in KIBOR rate charge their customers for their profit.
