Chapter 6

Indicators of Interest Rates

Many transactions in the economy would not occur if the buyer needed to have funds readily available to use as payment. Most households would not be able to purchase homes without borrowing a portion of the purchase price. Some financially constrained households would not be able to meet daily living needs without the ability to borrow. Other households have excess funds that are not needed immediately and may place those funds in bank accounts or bonds to be used as a source of loans to others, in exchange for earning a return on their money.

New businesses are usually unable to establish a credible operation without loans, and existing businesses may need to borrow to pursue potentially advantageous ...

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