Interest Rate Report

RUNNING HEADER: Interest Rate Report

Interest Rate report

Victoria Peskett

University of Phoenix

Economics

ECO 531

Fred Bell

December 7, 2008


Interest Rate Paper

Decisions

        Interest rates can be used to determine the amount of money demanded. The more money demanded for transactions contributing to the nominal GDP the larger the money value. Higher interest rates can be associated with lower volumes of money demanded for transactional use, as the cost of obtaining said cash becomes more expensive. Big Drive Auto may determine that interest rates are too high to borrow, and put off transactions requiring borrowing such as expansion.  If interest rates are lower, they may have an increased demand for borrowing activities.  In general, the lower the interest rate the more money will be demanded at that rate.

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Cost of Operations

        Interest rates paid and earned affect the cost of operating expenses. In a business the goal is to keep operating costs low to increase the revenues and profits generated from the sale of vehicles or products sold. The higher the interest rate paid on a loan, the higher the operating costs will prove to be. If costs are declining having liquid cash available may help the business to purchase products and materials at a lower cost. If interest rates are high then having too much liquid cash available could be costly and the business will likely invest ...

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