2.2 Theoretical Literature. 2.2.1 Theoretical Literature

The interest rate has three related jobs. First, the interest rate equalizes savings and borrowing. Secondly, the interest rate equalizes net savings and investment. Thirdly, the interest rate allocates spending for consumption relative to investment. (Foldvary, 2015, web.)

In recent years, economists have demoted savings on the economic value chain. Keynesians view savings as detrimental to growth because the act removes money from circulation and decreases spending. Policy makers have made rules that reward spenders and reprimand savers.

In the long run, the real interest rate is determined by the balance of saving and investment. The nominal interest rate that the Fed targets most closely is the federal funds rate, which is the rate commercial banks each other for very short-term loans.

Interest rate is the percentage of the loan that is charged as interest. The interest rate is determined by 3 factors. The first is the rate that the Federal Reserve bank charges the banks. The second aspect that determine the interest rates is the demand and supply of bonds and treasury notes. Finally, the third aspect of the interest rate is determined by the bank. The bank sets the rate according to their needs.

Interest rates have a vital part in the American economic systems, whether the Feds decides to increase or decrease the interest rates the banks pass that onto the consumers and the economy. There have been many arguments why interest rates need to be increased; lower interest rates have caused Americans to have lower incomes and not be motivated to save because of the low rates (Bartlett, 2012).

The significance of establishing the future-oriented saving's plan would depend on the need of the household and its contributors. For instance, a household utilizing cautious spending habits would reduce the risks in their financial plan; while also creating a monetary analysis which could be easily managed.

The interest rate is the amount charged above the amount loaned, saved or borrowed while exchange rate is the value of a currency compared to another currency.

The impact of savings rate in an economic has become a very conflicting issue in research and among economist all over the world. This may be due to the importance of savings generally to the economic growth and development of any nation. However, the structure of every economy cannot be generalised by a particular economics’ variation because various countries have different social security and pension schemes, and different tax systems, all of which have an effect on disposable income. In addition, the age of a country’s population, the availability and ease of credit, the overall wealth, and cultural and social factors within a country all affect savings rates within a particular country. Therefore,

Interest rates are a fraction of money that when you loan money from a bank, is a percent of that money that you additionally pay. It may seem like a small amount of money, but over years, it adds

10) The term structure of interest rates is a graphical presentation of the relationship between the

No concept or application of interest rates, because interest or riba (in Arabic / Islam) is against the Shariah law (Sapp, 2010, p. 3)

J. The interest rate is the price paid for borrowing money and the price of equity capital is dividends plus capital gains. The four most important fundamental factors that affect the cost of money or the general level of interest rate are production opportunities, time preferences for consumption, risk, and inflation.

A: Investment spending depends on interest rates due to opportunity cost and risk. For example, when interest rates rise, the opportunity cost of your investment also increases. When interest rates are higher investors are willing to pay less for payment in the future. Which in turn leads to a lower rate of investment. The opposite can be said for falls in interest rates that are met will lower opportunity costs.

It is something that can be found from credit rates to the banks, interest rates, and plans. Despite the fact that most have little to no knowledge on this subject and because this concept is prominent in business transactions, more people should seek a greater understanding of compound interest. Learning about interest rates would benefit a person greatly as they would better understand what it takes to pay off their interest and debts on credit card and loans. They will also be able to better understand how to invest their money, and how to get the biggest profit and reward out of their

     Most People have money in a savings account and wonder how to figure out the actual interest rates or the APR (annual percentage yield). To find the amount of interest you would use this formula: P (principle) x R (rate) x T (time) = I (interest)