Principles of Microeconomics / Unit 3 MIC 0215 short lesson, about 20 seconds
The Interest Rate Is the Price of Capital
Captions available
The idea
The interest rate is the price of borrowed funds. A higher rate lowers the quantity borrowers want and raises the quantity savers offer, so the curves cross at an equilibrium rate.
In practice
Above the equilibrium rate funds go unlent; below it, borrowers are turned away.
Where people slip
The rate is the return to waiting; unit fifteen shows it also discounts every future payment.
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