NOW YOU KNOW WHAT MAKES INTEREST RATES
Learn even more about this topic with the Encyclopedia of Personal Finance™
You should now have a solid understanding of the key
factors that determine interest rates. Interest rates are
essentially the price of borrowing money. As with any commodity,
there is supply and demand of money, which determines its price or
interest rate. The Federal Reserve's monetary policy and the
aggregate savings rate in the economy determine the supply of
money. Businesses, the government, and consumers all demand money.
Their demand combines with the supply of money to determine the
rate of interest.
Because interest rates are connected to
almost all business decisions, it is very important that investors
understand how rates are determined and what implications they have
in investment decisions. Click here to learn even more about this topic with the Encyclopedia of Personal Finance™