Free Essay Example: Prime Interest Rate

Published: 2023-03-26
Free Essay Example: Prime Interest Rate
Type of paper:  Essay
Categories:  United States Macroeconomics Banking
Pages: 3
Wordcount: 652 words
6 min read

Prime interest is provided to the consistent and best clients. The current prime rate is 4.75% (Amadeo, 2019). it is dependent on the central fund rate accomplished by the national reserve, which is the country's central bank. The banks charge the other banks as a personal loan over the night and borrowing deferral funds from each bank to achieve the reserve need of the central bank every night (Amadeo, 2019). The main interest is three levels more than the national funds proportion. When the range of the current federal reserve rate interest rate was between 1.5% and 1.75% by the national open market committee, the banks reduced the prime rate (Amadeo, 2019).

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The relevance of the prime interest rate to the corporation and its industry is very significant. The top rate significantly affects the economy's liquidity. The decrease in prime rate increases financial markets' cash, making loans less expensive and more comfortable to get by the organization (Amadeo, 2019). Ultimately, it causes the expansion of the organization and the industry. High prime rates dry up the liquidity slowing down the economy.

Gross Domestic Product

The gross domestic product can be described as a means of evaluating the national output and income of the economy of a nation at specific periods. It is focused on the overall market value of the final products and services generated at a particular time usually one year (Kira, 2013, p. 149). The evaluation of the overall market value entails the added amount at each production level of the final services and goods manufactured in a given time monetarily. Economic policies get structured by macroeconomic models providing logical structure linking supply and demand. Macroeconomic models imitate the actual economy and utilized in policy evaluation.

Gross Domestic Product relevance to the corporation and its industry is dependent on policymakers based on structural parameters. The parameters include production elasticity to labor and capital inputs, investment elasticity to change in aggregate demand or interest rate and the marginal propensity of imports and consumed products. The policymakers are responsible for the control over instruments of policies. The tools include tax rate, interest rate, exchange rate and government spending (Kira, 2013, p. 150). During the implementation of specific measures into the policy, they research into economic implications, change, trade balances, employment and the actual output of the policy measures. The strategies developed influence how the organization survives; hence a positive GDP indicates the growth and progress of the organization in its industry.

Gross National Product

GNP entails the cost of services and properties that a country produces by the business and residents everywhere in the country. It accounts for the number of investments that the United States citizens and organizations inside and out of the country and summarizes the product values produced by domestic firms in the country (Amadeo, 2020). It does not account for the income earned by foreign residents and organizations in the United States, excluding goods produced by international companies in the United States.

Gross National Product relevance to the corporation and its industry is in providing critical information on economic variables, production output, employment, investments, savings, and manufacturing. The GNP is used to determine inflation hence determining the company position in the market. It gets used in evaluating payments balance (CFI, 2019). A deficit in the balance indicates that the country has less value for exports due to more imports of services and goods. It clearly describes the export and import values which are crucial for the organization.


Amadeo, K. (2019, December 18). Prime Interest Rate and How It Affects You. Retrieved from

Amadeo, K. (2020, January 16). What Does Gross National Product Say About a Country? Retrieved from

CFI. (2019, December 7). Gross National Product - Learn How to Calculate GNP of a Country. Retrieved from

Kira, A. R. (2013). The Factors Affecting Gross Domestic Product (GDP) in Developing Countries: The Case of Tanzania. European Journal of Business and Management, 5(4).

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