Interest Rates 101 ๐ฐ
Interest = the price of borrowing money (or the reward for lending it) ๐
What is it?
You borrow $10,000 at 5% โ you pay back $10,500 after 1 year.
Simple interest = fixed on original amount
Compound interest = interest on interest โ grows much faster! ๐
Why do they matter? ๐
They control how people save, spend, borrow & invest โ they steer the whole economy!
High Interest Rates ๐
โ Saving becomes attractive (better returns on deposits)
โ Borrowing gets expensive โ people spend & invest less
โ Slows economy + helps fight inflation ๐ฅ
Low Interest Rates ๐
โ Borrowing is cheap โ more loans, spending & business investment
โ Saving earns almost nothing โ people spend instead
โ Boosts growth (but can cause inflation if overdone)
Negative Interest Rates? ๐ฑ
Yes, theyโve happened!
You actually pay to keep money in the bank.
Goal: force people to spend or invest instead of hoarding cash during deep crises.
Bottom line
Central banks raise rates to cool the economy
They cut rates to heat it up
Interest rates are like the economyโs thermostat ๐ก๏ธ โ small changes, massive impact!
Got it? Now you understand one of the biggest forces moving your money & the world! ๐ก
#binance #latosha #interestrate
