b) Where do they get the money from to pay interest?
2 List the reasons why firms and individuals borrow money.
3 Assess the effect of a rise in interest on people's desire to borrow money. How will this affect the demand for goods and services?
4 a) Go to your local banks and building societies and find out the rate of interest that they pay to investors. What factors determine the rate of interest offered to depositors?
b) Imagine that you have £5000 to invest. Find out which bank or building society offers the best return on your money. How much interest would be earned if the money was left untouched for three years? (Remember, when interest is added to the account at the end of the first and second year, it will also earn interest.
