Class Notes (810,826)
Economics (682)
ECO100Y5 (342)
Lecture

# Chatper 19 partII notes.pdf

3 Pages
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School
University of Toronto Mississauga
Department
Economics
Course
ECO100Y5
Professor
Kalina Staub
Semester
Fall

Description
ECO100:'Chapter'19//'Part'Two' ! One!thing!we!hear!a!lot!about!in!the!news!is!interest!rates.! ! In!general,!and!interest!rate!is!the!cost!of!____________________________!money!for!a! specified!amount!of!time.!!Typically,!this!is!expressed!in!percentage!points!per! ____________,!so!if!the!interest!rate!were!10%,!then!one!would!have!to!pay!_____________! for!each!dollar!they!borrowed!for!1!year.! ! “The”!interest!rate!can!refer!to!many!different!rates,!since!different!types!of! customers!are!offered!different!rates!depending!on!their!______________________.!!Most! interest!rates!follow!_______________________!growth!path.! ! Two!main!interest!rates!economists!talk!about:! 1. The!Prime!Interest!Rate!–!the!rate!that!banks!charge!____________________________! _________________________! 2. The!Bank!RateKthe!rate!that!_______________________________!charges!to! ____________________________!banks!(RBC,!CIBC,!etc)! ! Nominal(v.(Real(Interest(rates( ! Nominal!interest!rateK!the!cost!of!borrowing!in!_________________________________!dollars.! ! Real!interest!rateK!the!cost!of!borrowing!adjusted!for!changes!in!_______________________! (inflation)! ! Real!interest!rate!=! ! ! !! Example:! Which!borrower!is!getting!a!better!deal:!Borrower!A!who!must!pay!\$12!in!interest! on!a!\$100!loan!taken!out!a!year!ago!and!who!has!experienced!inflation!of!8%!over! the!past!year?!Or!Borrower!B!who!must!pay!interest!of!\$6!on!a!loan!of!\$100!taken! out!a!year!ago!and!faces!inflation!of!1%?! ! ! ! Credit!markets!link!available!funds!from!households!and!businesses!to!those! households!and!businesses!loo
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