What Factors Influence Interest Rates?

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Interest rates are determined by the interplay of credit demand and supply within the money market. An upsurge in the demand for credit results in higher interest rates, whereas a decline in demand leads to lower rates. Conversely, an excess supply of credit drives rates down, while a shortage of credit pushes rates up. The financial decisions made by individuals, businesses, and governments regarding saving and spending directly impact the dynamics of credit demand and supply.

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