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Chapter 1: Q.12 (page 66)

Is everybody worse off when interest rates rise?

Short Answer

Expert verified

Bank, lenders and customers with saving deposits do not worse off when interest rate rises.

Step by step solution

01

Step 1. Introduction

The interest rate is the percentage of a loaned sum that a lender charges the borrower as interest, usually represented as an annual percentage. It also refers to the sum provided on deposits.

02

Step 2. Explanation

No, when interest rates rise, not everyone suffers. people who need to borrow funds for any purpose are negatively because financing costs more; conversely, savers earn profit because they can earn greater interest rates on their savings.

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