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Thursday, 11 August 2011

Word of the Day

Interest Rate

The cost of borrowing and the reward for saving. The interest rate in the UK has remained 0.5% since March 2009 and is likely to remain at this rate until at least the end of the year. The US interest rate will remain 0.25% until mid-2013. A low interest rate is supposed to lead to an increase in AD, thus is the Central Bank's attempt to try and revive the economy. A high interest rate attempts to increase savings and reduce consumption, thus lowering AD.

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