Nobody downloaded yet

What factors would lead to a rise in the cost of credit in an economy, and in what circumstances - Essay Example

Comments (0) Cite this document
Summary
The terms of credit display the magnitude of cash discount, expiration date, and the date due. An example of a term of credit is 2/10 which means…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER94.5% of users find it useful
What factors would lead to a rise in the cost of credit in an economy, and in what circumstances
Read TextPreview

Extract of sample "What factors would lead to a rise in the cost of credit in an economy, and in what circumstances"

Download file to see previous pages The formula, when applied, can show the annual rate of interest to be paid towards exhausting borrowed money. Acceptance of credit is often termed as a source of finance to a business due to the fact that it escalates with business expansion. (Siegel, et al, 1997)
A nation’s central bank can determine the cost of credit in an economy by either raising or lowering it. For instance; in 1989 the bank of Japan raised the rates of discount by 0.5% to 4.25%. Once the new rate took effect immediately, it would help in stabilising the economy’s prices by curbing the pressures due to inflation and enhance economic growth.
The discount rate is applied by the central bank while charging interests in the bank loans extended to other banks. Therefore, the raising of discount rates would amount to a rise in the cost of credit to the whole economy in entirety. An example to illustrate this instance of Japan is the immediate announcement by big banks in Japan, where they said that they would escalate the prime lending rates for long-term funds to 6.8% from the previous 6.5%. (Reuters, 1989)
The apt measurement of the credit cost is the prevailing real interest rates in the economy. Market interest rates have been influenced by the inflationary levels and thus cannot present the true meaning of interest rates in the economy. Thus, it is the rise in the real interest rates in a nation that lead to a rise in the cost of credit in the market. Also according to the center for popular economics, the cost of credit in a country may rise due to an increase in taxes. If the real interest rates in an economy and which are reflected in the GDP deflator rose and the taxation levels did the same, they would have an upward effect on the credit costs. (Center for popular economics, 1896)
A country’s economy depends so much upon the amounts of credit held by persons in it. Attitudes of people towards the credit can also change the course of things in the ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“What factors would lead to a rise in the cost of credit in an economy, Essay”, n.d.)
What factors would lead to a rise in the cost of credit in an economy, Essay. Retrieved from https://studentshare.org/miscellaneous/1552833-what-factors-would-lead-to-a-rise-in-the-cost-of-credit-in-an-economy-and-in-what-circumstances
(What Factors Would Lead to a Rise in the Cost of Credit in an Economy, Essay)
What Factors Would Lead to a Rise in the Cost of Credit in an Economy, Essay. https://studentshare.org/miscellaneous/1552833-what-factors-would-lead-to-a-rise-in-the-cost-of-credit-in-an-economy-and-in-what-circumstances.
“What Factors Would Lead to a Rise in the Cost of Credit in an Economy, Essay”, n.d. https://studentshare.org/miscellaneous/1552833-what-factors-would-lead-to-a-rise-in-the-cost-of-credit-in-an-economy-and-in-what-circumstances.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF What factors would lead to a rise in the cost of credit in an economy, and in what circumstances

The Major Factors of the Credit Agricole

...The Major Factors of the Credit Agricole Introduction Increasing competition and volatile markets have forced many organizations to look for new ways of doing business. In order to create more value and diversify the risk, organizations have expanded into international markets. Expansion into international markets however, presents unique and new challenges to the firm so that firms have to look into different factors before deciding to enter into such markets.( Czinkota, & Ronkainen,1994) Credit Agricole is one of the largest retail banking groups in the world and is the largest banking group in France. The overall structure of the firm is such that it is owned by many...
10 Pages(2500 words)Essay

How would Jesus lead Worship

...?Introduction The book How Would Jesus Lead Worship Biblical Insights for Today's Church by Sam and Sara Hargreaves is a significant study devoted to the problem of worshipping God in contemporary Christian churches. The main emphasis is on personal attitude of a believer toward God. It is quite important to have Jesus as a worship leader during the time of praise. Therefore, composed of two parts, the book is all about the example of Jesus in how he would lead Jesus into the presence of Holy Spirit. Concise summary The first, smaller, part of the book is based on the Book of Hebrews from the New Testament. It is all about people’s normal vision of worship compared to how Jesus, as a Church leader sees it Himself. The second part... is as...
3 Pages(750 words)Essay

Factors that Lead to Hyperinflations

...). These efforts result in a large reduction in money balances in real terms and a large rise in monetary velocity. 1In general, economists agree that hyperinflation is caused by excessive supply of money which leads to excessive aggregate demand over the aggregate supply of goods and services. Excessive aggregate demand may result on account of a number of factors, such as the following: (a) Excessive supply of money, which is more than proportionate to increase in production of goods and services. (b) Increased public expenditure which includes government spending on infrastructure and social expenditure, (c) Credit expansion by the monetary authorities by reducing...
6 Pages(1500 words)Essay

Rise the of Global Economy

.... Hence the government should try and purchase back the securities which would result in availability of money with the people. This would help in boosting the economy because with money available, consumers would be motivated to buy. On the other hand, increase in national debt may lead to an increase in taxes and interest rates which is going to affect the output adversely. It is estimated that the interest payments by US would increase from 1.2% in 2009 to 3.4% of GDP in 2019. The European Union is fast losing its confidence on sovereign debt. The Greek economy has been through a major credit default...
10 Pages(2500 words)Essay

Why Would You Decide to Use an Online Dating Site Factors That Lead to Online Dating

...is reliable and are likely to use it for online dating. therefore, the perceived reliability of the internet is a major factor in determining online dating(p. 210). However, this study is faced with several limitations such as those of age, trust and operalization of the number of tasks an individual does on the internet, since they cannot be quantified. Therefore, further studies that have more precise operational and theoritical framework should be conducted to give a clearer picture. Conclusion Regardless of the limitations, this study is critical in highlighting the foundation of the factors determining online dating. Age, sex, education, trust, total number of tasks that a person does on the...
2 Pages(500 words)Article

How would you describe International Political Economy

...thing and individuals like Karl Marx and Adam Smith always linked the two (Frieden and Lake 4). In effect, this emphasises the importance of tying politics to the economy while developing policies for participation in international trade considering that scholars in the 20th century increasingly divorced politics from the economy (Frieden and Lake 4). Market operations and dynamics might be the primary cause for divorcing politics from the economy. In this regard, it is evident that there are basic laws that govern markets to operate independently without the need for intervention from the government or any other sources (Frieden and Lake 2). In this case, the laws of demand and supply...
8 Pages(2000 words)Essay

Global economy/factors affecting global economy of Harley Davidson

...Factors Affecting Global Economy of Harley Davidson This study will focus on globalization strategy of Harley Davidson. This company is American motorcycle giant. It has already established their brand name in Europe but now this organization wants to expand their dealership network across Asia. Harley Davidson is known for manufacturing heavyweight motorcycles but now they want to manufacture all types of motorcycles. Later part of the study will explain about internet business model. This study also focuses on application of internet in terms of digital marketing. Harley can use different components of digital marketing to expand their business. Finally this study will focus on competitive advantage...
7 Pages(1750 words)Essay

Study of the Factors that Lead to Decline in Witchcraft and rise of Christianity

...Research Topic: Study of the Factors that Lead to Decline in Witchcraft and rise of Christianity Research Primary source: Francis H., An Historical Essay Concerning Witchcraft: With Observations Upon Matters of Fact; Tending to Clear the Texts of the Sacred Scriptures, and Confute the Vulgar Errors about that Point. And Also Two Sermons: One in Proof of the Christian Religion; the Other Concerning Good and Evil Angels Knaplock & Midwinter Publishers London, (1720), Print. Research Proposal As far as witchcraft and Christianity is concerned, Francis book A Historical Essay Concerning Witchcraft brings up a detailed analysis of the effects of witchcraft, its trends and...
3 Pages(750 words)Research Paper

Irans nuclear development would eventually lead to a war

...Iran’s Nuclear Development Iran’s repudiation towards possession of mass destruction and the claim that they had stopped producing them is a lie according to Netanyahu, Israel’s prime minister. The Obama’s administration dream of ending nuclear proliferation in the Middle East is especially challenged by the production of nuclear weapons in Iran. The neighbors of Iran, Israel, also risk being wiped out if the said nuclear weapons are created by Iran. Though they are going to discuss it in the United States, Netanyahu still believes that Iran is using diplomatic openings to cover up what is happening there. Iran’s nuclear development would eventually lead to war. The main issue, however, will be that the...
1 Pages(250 words)Essay

FACTORS AFFECTING VEHICLE FUEL ECONOMY

...Factors Affecting Vehicle Fuel Economy By Introduction A greater percentage of the total petroleum products in the United States is consumed by the motor industry, and this is also known to have a great impact on the natural environment, mainly through the gas emissions that pollute the environment (Gautam, 2010). The supply of non-renewable energy has been declining over the years, thus this poses a danger, as there is the risk of depleting non-renewable energy. For this reason, it has become important that governments draw a keen interest in the aspect of fuel efficiency and adopt strategies that promote fuel economy in order to prevent the overconsumption of energy. Objectives The...
2 Pages(500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic What factors would lead to a rise in the cost of credit in an economy, and in what circumstances for FREE!

Contact Us