ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Its price – the interest rate – thus fluctuates according to supply and demand of money. A high supply and a low demand for money depress its price; a low supply and a high demand pushes the price up.

Detailed explanation-2: -Like all other commodities, money has also a price. And the price of money is the rate of interest. It is the periodic payment made for the use of money. The cost of borrowing money, measured in rupees per year per rupee borrowed, is the interest rate.

Detailed explanation-3: -When you borrow money, interest is the cost of doing so and is typically expressed as an annual percentage of the loan (or amount of credit card borrowing). When you save money it is the rate your bank or building society will pay you to borrow your money. The money you earn on your savings is also called interest.

Detailed explanation-4: -The cost of money is the opportunity cost of holding cash instead of investing it, depending on the interest rate. An interest rate is the rate at which a borrower pays interest for using money that they borrow from a lender.

Detailed explanation-5: -What are the Different Types of Interest? The three types of interest include simple (regular) interest, accrued interest, and compounding interest. When money is borrowed, usually through the means of a loan, the borrower is required to pay the interest agreed upon by the two parties.