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WorksheetsUnderstanding Interest Rates
Total questions: 10
Worksheet time: 5mins
What is the best way to think of interest rates?
As the rate of inflation
As the value of stocks
As the cost of living
As the price of money
What does a 5% interest rate on a $100 loan mean?
A $5 interest payment on a $100 loan for one year
A $10 interest payment on a $100 loan for one year
A $5 interest payment on a $50 loan for one year
A $10 interest payment on a $50 loan for one year
What is the most important factor in determining why interest rates change?
The price of gold
The supply of funds available from lenders and the demand from borrowers
The level of government debt
The stock market performance
What happens to mortgage rates if the demand for mortgage borrowing becomes higher than the available funds?
Mortgage rates will go up
Mortgage rates will go down
Mortgage rates will be eliminated
Mortgage rates will stay the same
What is fiscal policy?
The way banks set their interest rates
The way governments spend their money and finance their endeavors
The way companies invest in stocks
The way consumers save their money
What is the effect of a high level of government expenditure and borrowing?
It increases the supply of money
It lowers the interest rates
It reduces the demand for capital
It makes it hard for companies and individuals to borrow
What does it mean when monetary policy is 'loosened'?
The government has created more money
The government has reduced taxes
The government has decreased spending
The government has increased interest rates
What is the effect of a 'tightened' monetary policy?
Interest rates rise
Interest rates fall
Inflation increases
Inflation decreases
Why do investors demand higher interest rates during high inflation?
To lower the risk of default
To reduce their savings
To increase their spending
To preserve their purchasing power
What is the 'Net Interest Margin' (NIM) for a bank?
The interest rate set by the central bank
The difference between the interest paid to depositors and the interest charged to borrowers
The total amount of deposits in the bank
The total amount of loans given by the bank
