Interest Rates and the Market for Loanable Funds

The rental price of money

Nominal and real rates

One economy, many rates

Why the base rate moves

In the market for loanable funds, which parties supply funds and which demand them?

A savings account quotes a nominal rate of 6 percent while inflation runs at 2 percent. Using the simple relationship in this lesson, what is the real interest rate?

Why is the interest rate on short-term US Treasury borrowing called the risk-free rate?

According to the lesson, why do credit card loans carry higher interest rates than car loans to the same individuals?

Holding a project's cash flows fixed, what does a rise in the real interest rate do to its appeal?

Which ordering of borrowing rates from lowest to highest matches the lesson's risk-premium logic?

Using the simple relationship in this lesson, a nominal rate of 7 percent with 3 percent inflation gives a real rate of how many percent? Write the number.

What two-word term names the interest rate on short-term US government borrowing, the baseline carrying essentially no credit risk? Answer in lowercase.

What two-word term names the extra interest lenders demand above the risk-free rate to bear the chance of nonrepayment? Answer in lowercase.

This lesson calls the interest rate by what three-word name, emphasizing that borrowing is renting money? Answer in lowercase.