Interest Rate - Theories

The interest rate is a key part of the government's monetary policy so we will look in this section at relevant theories about how interest rates affect the economy and individual consumers. The theories considered are:

• T1 Interest rate variation - why do interest rates vary?
• T2 Monetary policy - how is the interest rate used?
• T3 Affecting demand - how does the interest rate affect demand?
• T4 Maintaining interest - why do interest rates stay where they're set?