ta muallif kitobidan iqtiboslar Fascinating economy
Larissa Zaplatinskaia

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Credit is borrowed money. Credit, or a loan, must be paid back with interest, which is an extra charge borrower pay for the use of the lender’s money. Interest rates are determined by various factors. The length of the loan period is one major determining factor of the total interest amount owed, and different loan periods lead to much different total interest payments.

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A 15-year loan of $100,000, on the other hand, will accrue $5,000 in interest each year, for a total of $75,000 in interest alone at the end of 15 years.

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The U.S. banking system is the centerpiece of the nation’s economy. People engage in complex financial interactions every day, and these interactions require a stable banking system to handle them. The strength and stability of the U.S. banking system is one important reason that the U.S. economy grew to be so large and powerful.

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Second, lenders consider the rate of inflation. During the loan period, prices may rise, devaluing the loan amount over time. Interest rates will go up during periods of rapid inflation.

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First, lenders consider opportunity cost. For the period of the loan, the lender cannot use or otherwise invest the loaned money for other purposes, so these other opportunities are lost. Interest helps make up for the lender’s inability to use the money for the next best opportunity.

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What factors do lenders consider when they establish interest rates?

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a 10 percent interest rate means that the annual interest on the loan equals $100.

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Interest is the price someone pays to borrow money. In a sense, interest is like a rental payment for the use of the borrowed money. The amount of interest a borrower pays is determined by how much they borrow, how long they have to repay the loan, and the interest rate. Most interest rates are a set percentage of the total loan amount paid each year by the borrower. For instance, borrowing $1,000 at

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Suppose that a consumer does not have enough money to buy what she wants. One way she can still purchase those things is by using credit. Although consumers can buy goods and services with credit, it is not the same thing as money. Credit gives consumers access to money, but it is borrowed, and must be returned, usually with interest.

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The Changing Face of Money

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ta muallif kitobidan iqtiboslar Fascinating economyLarissa Zaplatinskaia

ta muallif kitobidan iqtiboslar Fascinating economy
Larissa Zaplatinskaia