Interest Rate is the cost of borrowing money or the return on saving/investing money, usually expressed as a percentage per year.
- For borrowers: Interest rate is the price you pay to use someone else’s money (e.g. loans, mortgages).
- For savers/investors: Interest rate is the income you earn from lending money (e.g. bank deposits, bonds).
Why Interest Rates Matter
Interest rates affect almost every part of the economy:
- Consumers: borrowing, spending, saving decisions
- Businesses: investment and expansion costs
- Financial markets: stocks, bonds, currencies
- Inflation: controlling price stability
- Economic growth: encouraging or slowing activity
Simple Example
THE ETERNAL SOVEREIGN 