ERIC Number: ED456070
Record Type: Non-Journal
Publication Date: 2000-Oct
Reference Count: N/A
Points of Interest: What Determines Interest Rates?
Interest rates can significantly influence people's behavior. When rates decline, homeowners rush to buy new homes and refinance old mortgages; automobile buyers scramble to buy new cars; the stock market soars, and people tend to feel more optimistic about the future. But even though individuals respond to changes in rates, they may not fully understand what interest rates represent or how different rates relate to each other. This booklet is intended to help people better understand interest rates and how they are influenced by these economic forces. The first section, "Levels of Interest," examines the forces that determine the general level of rates. This section discusses basic factors of supply and demand for funds and the function of banks and other similar institutions in meeting the needs of savers and borrowers. It examines other factors such as fiscal policy and the actions of the Federal Reserve System. The second section, "Different Interests," examines the variations among individual rates, explaining why a 6-month Treasury bill may have one rate, business loans another, and home mortgages still a third. This section discusses the unique characteristics of each credit transaction, such as risk, rights, and tax considerations, and how these factors affect the decision-making process of borrowers and lenders. Contains a list of additional readings. Included with the booklet is a teaching guide that contains content questions and answers and activity suggestions. (BT)
Descriptors: Banking, Consumer Education, Credit (Finance), Economic Factors, Economics Education, Interest (Finance), Secondary Education, Social Studies, Supply and Demand
Public Information Center, Federal Reserve Bank of Chicago, P.O. Box 834, 230 South LaSalle Street, Chicago, IL 60690-0834. Tel: 312-322-5111; Fax: 312-322-5515; e-mail: firstname.lastname@example.org; For full text: http://www.chicagofed.org/publications/index.cfm#P.
Publication Type: Guides - Non-Classroom; Reports - Descriptive
Education Level: N/A
Audience: Practitioners; Teachers
Authoring Institution: Federal Reserve Bank of Chicago, IL.