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How do people contribute to the supply of credit in the economy?
People contribute to the supply of credit in an economy by offering loans to consumers. These would be banks, credit unions, payday loan companies, etc. Consumers contribute to the supply of credit by borrowing money and paying interest, sometimes at very high interest rates.
How does the interest rate regulation effect the demand and supply of credit in the country?
demand and supplyInterest rate regulation refers to the cost of credit. If the interset rate rises, than this means that the amount of expenditure in the economy will fall. This is due to the fact that as interest rates rise, the cost of borrowing credit goes up, this then invokes house holds and firms to stop investing because they will be paying more interest. Thus the 2 sectors (households and Firms) start saving. This means that there is less private investment expenditure in the economy, therefore bringing along with it less money in the economy invested into capital. This means there will be less job opportunities in the economy, hence unemployment can rise, and therefore income will fall... therefore there will not be much spending, and this means demand for goods and services will fall, which decrease the amount of demand in the economy, and increases the amount of supply!!! Edit: The above answer is fairly misleading in my opinion. The statement that interest rate is the price of credit is correct. This means that we can consider saving as "credit supply" and borrowing as the "credit demand". If interest rates were allowed to self regulate then, through the price mechanism, interest rates would provide information to borrowers and investors and supply and demand would vary as required according to changing economic conditions. In this hypothetical situation price (interest rate) acts as a mechanism that guides the allocation of resources (in this case credit) as required by the economy.In reality though the government fixes the interest rate. This is a form of price fixing and as such it conveys misleading information to buyers (borrowers) and sellers (investors). Setting artificially low interest rates encourages borrowing and discourages saving, thus setting up a misallocation of resources and encouraging risky economic behaviour, e.g. expanding speculative projects at a time when doing so is not favourable. In addition it rapidly exhausts the supply of real credit and so encourages borrowing and inflation.Setting artificially high interest rates has the opposite effect- borrowers find it difficult to obtain credit while saving and investing is artificially stimulated. In this case business expansion is discouraged when it is required by the prevailing economic conditions.
When is the LM curve relatively steep?
If money demand has low sensitivity to change in interest rate,the interest rate would have to rise by a large amount to reduce the demand for real balance back to the fixed leveli.e the level at which demand for money is equal to supply of money.Accordingly,the LM curve would be quite steep
What are the advantages of credit in economy?
AdvantagesPurchase Power and Ease of Purchase - Credit cards can make it easier to buy things. If you don't like to carry large amounts of cash with you or if a company doesn't accept cash purchases (for example most airlines, hotels, and car rental agencies), putting purchases on a credit card can make buying things easier.Protection of Purchases - Credit cards may also offer you additional protection if something you have bought is lost, damaged, or stolen. Both your credit card statement (and the credit card company) can vouch for the fact that you have made a purchase if the original receipt is lost or stolen. In addition, some credit card companies offer insurance on large purchases.Building a Credit Line - Having a good credit history is often important, not only when applying for credit cards, but also when applying for things such as loans, rental applications, or even some jobs. Having a credit card and using it wisely (making payments on time and in full each month) will help you build a good credit history.Emergencies - Credit cards can also be useful in times of emergency. While you should avoid spending outside your budget (or money you don't have!), sometimes emergencies (such as your car breaking down or flood or fire) may lead to a large purchase (like the need for a rental car or a motel room for several nights.)Credit Card Benefits - In addition to the benefits listed above, some credit cards offer additional benefits, such as discounts from particular stores or companies, bonuses such as free airline miles or travel discounts, and special insurances (like travel or life insurance.) While most of these benefits are meant to encourage you to charge more money on your credit card (remember, credit card companies start making their money when you can't afford to pay off your charges!) the benefits are real and can be helpful as long as you remember your spending limits.DisadvantagesBlowing Your Budget -- The biggest disadvantage of credit cards is that they encourage people to spend money that they don't have. Most credit cards do not require you to pay off your balance each month, so even if you only have $100, you may be able to spend up to $500 or $1,000 on your credit card. While this may seem like 'free money' at the time, you will have to pay it off -- and the longer you wait, the more money you will owe since credit card companies charge you interest each month on the money you have borrowed.High Interest Rates and Increased Debt -- Credit card companies charge you an enormous amount of interest on each balance that you don't pay off at the end of each month. This is how they make their money and this is how most people in the United States get into debt (and even bankruptcy.) Consider this: If you have a $100 in savings, most banks will give you at the most 2.0 to 2.5% interest on your money over the course of the year. This means you earn $2.00 - $2.50 a year on your $100 savings. Most credit cards charge you up to 10 times that amount of interest on balances. This means that if you have $100 balance that you don't pay off, you will be charged 20-25% interest on that $100. This means that you owe almost $30 interest (plus the original $100) at the end of the year. A good way to look at this is in comparison to what you would earn in interest from a bank or owe in interest to a bank loan: Savings accounts may pay you around 2% interest; if you have a loan from a bank you may pay them around 10% interest (5 times as much as you earn off your savings); if you owe money to a credit card company, you may pay them around 20% interest (10 times as much as you earn off your savings.)Credit Card Fraud - Like cash, sometimes credit cards can be stolen. They may be physically stolen (if you lose your wallet) or someone may steal your credit card number (from a receipt, over the phone, or from a Web site) and use your card to rack up debts. The good news is that, unlike cash, if you realize your credit card or number has been stolen and you report it to your credit card company immediately, you will not be charged for any purchases that someone else has made. Even if you don't realize your credit card number has been stolen (sometimes you might not know until you receive your monthly statement), most credit card companies don't charge you or only charge a small fee, like $25 or $50, even if the thief has charged thousands of dollars to your card. There are several things you can do to prevent credit card fraud: If you lose your card or wallet, report it to your credit card company immediately.Don't loan your credit card to anyone and only give out your credit card information to trusted companies or Web sites.Check your statement closely at the end of each month to make sure all charges are yours.You can find out more about protecting your personal information by visiting our Personal Safety course.
Why would it be useful to examine a country's balance of payment data?
why would it be useful to examine a country balance of payment data
Does interest revenue have a normal debit balance?
No, Interest Revenue is income and would normally have a credit balance.
Is interest income is debit or credit?
Interest income would be a credit entry, as it increases a form of revenue. If the interest income is received in cash, the entry would be: Dr Cash Cr Interest income If the income was not yet received but will be at a later date, the entry would be: Dr Interest receivable Cr Interest income In either case, the Interest income account would be credited.
Does closing a credit card with a balance affect your credit rating?
Absolutely!!! Your credit score would go down and interest might be charged. Would be more of a lose for you. Its better to close it with a paid balance!
Which of these credit card features would be best for customers who want to pay off the balance on a high-interest credit card?
Low fees for balance transfers
Which one of these credit card features would be best for customers who want to pay off the balance on a high-interest credit card?
Low fees for balance transfers
What would be best for customers who want to pay off the balance high interest credit card?
The best solution - would be a low-interest loan from a bank ! Bank interest rates are MUCH lower than credit cards.
What is a credit card features would be best for customers who want to pay off the balance on a high interest credit card?
For customers looking to pay off a balance on a high-interest credit card, a card with a 0% introductory APR on balance transfers would be ideal. This feature allows them to transfer their existing high-interest balance to a new card without incurring interest for a specified period, typically ranging from 6 to 18 months. Additionally, cards with no balance transfer fees can further enhance savings during this payoff period. Finally, low ongoing interest rates can be beneficial for any remaining balance after the promotional period ends.
Is interest in rates in the debit or credit side of the trial balance?
Interest in rates typically appears on the credit side of the trial balance when it represents income earned, such as interest received on investments. Conversely, if it represents an expense, like interest paid on loans, it would be recorded on the debit side. Therefore, its placement depends on whether the interest is an income or an expense for the period.
What is the benefit of having a balance transfer credit card?
The benefit of having a balance transfer credit card is that they usually are issued with no fee and a very low to 0% interest rate for the first year. Someone would get this type of credit card to transfer other credit balances and thereby cutting down on the time it takes to pay off the high interest rate credit cards.
Is there an online tool to compare interest rates and rewards programs for credit cards?
Typically credit card reward programs are 1-2% of purchase while interest rates, APR, on credit card balances are in the mid-teens to low twenties. If the credit card balance is paid off monthly then it would be worthwhile to get the card with the reward program and higher interest rate since the higher interest rate would have no effect. However, if there is a monthly balance carried on the card then the interest charges will in most case be greater than any reward benefit so the card with the lower interest rate would be more suitable.
What you should do.... if now you are out of the country for a while and you cant pay the credit card debt. what will happen when you go back?
Your credit history would have suffered badlyThe interest/balance amount to be paid would have increased
Why might someone want to utilize a balance transfer offer and can you provide an example of a situation where it would be beneficial?
Someone might want to utilize a balance transfer offer to consolidate their credit card debt and take advantage of a lower interest rate. For example, if someone has a high balance on a credit card with a high interest rate, they could transfer that balance to a new card with a lower interest rate to save money on interest payments and pay off their debt more quickly.
