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Macroeconomics homework can get students perplexed and they may feel the need for some assistance with their assignment. Students usually plan on Google-ing out information the night before submission of an assignment. But when it comes to issues like Interest Rate, it is rather hard to find appropriate material for assignments online.
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That being said, here is an introduction to the topic for students.
Definition of Interest Rate in Economics
Interest Rate in Economics can be defined as the amount charged from a borrower by the lender for use of an asset, mostly cash. Expressed in percentage (%), Interest Rates are calculated on an annual basis, the rate being known as Annual Percentage Rate (APR). Apart from Cash, these borrowed assets on which interest is charged can be consumer goods or larger assets such as buildings or vehicles. Interest can be also seen as ‘leasing charge’ or ‘rent’ for the asset that is being borrowed and used. The Interest Rate is also known as ‘Lease rate’ when it comes to large assets like a building or a vehicle.
The rate of interest charged by a lender can vary from client to client. If the borrower is an acquaintance or assessed to be a ‘low-risk party’, the interest rate charged is comparatively lower than the one when the borrower is assessed to pose higher risk.
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