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Interest rate

AP Economics Chapter 4 and 6 notes

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Economics
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Financial economics
economics
Finance
Banking
Financial institutions
Debt
Mortgage industry of the United States
Credit card
Bond
Interest rate
Certificate of deposit
Savings and loan association
Business

Chapter 4 Notes, Economics Sect 1 Credit: the receiving of funds either directly or indirectly to buy goods and services today with the promise to pay for them in the future. The amount owed ? the debt ? is equal to the principal plus interest Principal: the amount originally borrowed in a loan Interest: the amount the borrower must pay for the use of someone else?s (the bank?s, credit union?s, stores, etc.) funds. Installment Debt: one of the most common types of debt today. Consumers repay this type of loan with equal payments, or installments, over a period of time. Ex. 36 equal payments over 36 months Durable Goods: manufactured items that last longer than 3 years, on an installment plan. Many are bought on an installment plan.

Econ Notes

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Economics
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economics
macroeconomics
monetary policy
money
inflation
Federal Reserve
Central banks
Economic policy
Federal funds rate
Interest rate
Real interest rate
deflation
Business

Notes Holding Money Means that I have money in such a way that it?s not earning any interest, not circulating, and has zero velocity.? Ex: money in a piggy bank? Demand for Money Transaction Demand Dt For purchase Varies directly with GDP Demand for money increases to purchase that which is produced by the economy, ie, GDP Simplification ( Dt is independent of interest rates) Asset Demand Da Money held as an asset, held for future investment Varies inversely with interest rates (opportunity cost) Precautionary Demand (brought up by Keynes) ?Rainy Day Money? You?re holding onto money for emergencies. Total demand for money, Dm =? Dt + Da and is the supply of money Bonds Bonds = Loans?
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