Assignment Details

Interest is what borrowers pay to the lender for using their money. Interest rates are given in percentages and are paid on the principal, the amount of money borrowed. The higher the interest rate, the higher the payment.

Understanding interest rates is important to your personal finances. They also have an impact on economic performance through consumer behavior. This assignment will deepen your insight into how interest rates are determined and their impact on the economy.

Using what you have learned, write a paper that addresses the following:

• Explain the key determinants of interest rates in financial markets.
• Compare nominal versus real rates of interest.
• Discuss the impact of interest rates on consumer or business behavior. (How do behaviors change as interest rates fluctuate?)
• Discuss the impact of inflation on consumer or business behavior.
• Evaluate the impact of interest rates and inflation on a nation’s economic performance.