Photo AI
Outline your understanding of the terms inflation rate and interest rate - Leaving Cert Business - Question 10 - 2017
Question 10
Outline your understanding of the terms inflation rate and interest rate. Inflation rate ____________________________________ Interest rate _______________________... show full transcript
Worked Solution & Example Answer:Outline your understanding of the terms inflation rate and interest rate - Leaving Cert Business - Question 10 - 2017
Step 1
Inflation rate
Answer
The inflation rate is a sustained percentage increase in the general level of prices or cost of living over a specified period, typically one year. It reflects how much the prices of goods and services have increased over that time frame. The inflation rate is commonly measured by the Consumer Price Index (CPI), which tracks the price change of a basket of consumer goods and services.
Step 2
Interest rate
Answer
The interest rate is the price or cost paid by a borrower to a lender for the use of money, expressed as a percentage of the amount borrowed. It can also refer to the reward for money saved or invested over a certain period, expressed as a percentage of the amount invested. The interest rate is determined by factors such as the lender's cost of funds and the economic conditions set by the central bank, such as the European Central Bank (ECB).