Interest Rates (HSC SSCE Economics): Flashcards

Cost of borrowing money as percentage of amount borrowed

Gap between bank lending and borrowing rates

Rates on loans with maturity under one year

Long-term rates typically higher due to risk and liquidity

Increases borrowing demand, pushes interest rates up

Increases loanable funds supply, pushes rates down

Lenders demand higher rates to offset inflation losses

Controls rates by setting cash rate via market operations

Higher preference reduces loanable funds, pushes rates up

Government borrows more, increases demand, pushes rates up