Exam Notes Economics GCSE
Economics Revision
AER (saving)
Annual Equivalent Rate (AER) shows the percentage of compound interest that would be paid on your savings once a year if you didn’t withdraw or add anything. The AER is the official rate for savings accounts, and allows you to compare rates fairly.
You might also see the ‘Gross’ interest rate shown – which will be less than the AER because it doesn’t show compound interest, just the flat rate of interest you’d get for the original amount you saved.
APR (borrowing)
Annual Percentage Rate (APR) shows the percentage you would have to pay on the money you borrow over the time it takes you to pay back the full loan. This is broken down into a rate per year.
APR is interest and any additional fees or charges added together. This means it’s a true reflection of what the debt will cost you, but it does mean you don’t know how much of the APR is interest, and how much is made up of charges.
SAVINGS ACCOUNTS
ISAs (Individual Savings Accounts): can be used for savings, just like a deposit account, but with a big advantage: you won’t pay tax on the interest you earn, or on any capital gain you make.
Regular savings account: you pay a regular monthly amount into the account and are likely to earn more interest than a standard savings account.
Standard savings account: more flexible than a regular savings account as you have instant access to your money, but the rate of interest will be lower.
If you are a tax payer then you will pay tax on both these accounts.
National Savings and Investments offer tax-free products like Premium Bonds and children’s savings accounts. These are backed by the government.
Stocks and shares: a stock is a stake in a company. If you buy a share of stock you are investing in the company and so if the company does well your investment allows you a share of the profit through a payment called a dividend. Of course the value of the shares will fall if the company doesn’t do well.
Stocks and shares ISAs:
AER (saving)
Annual Equivalent Rate (AER) shows the percentage of compound interest that would be paid on your savings once a year if you didn’t withdraw or add anything. The AER is the official rate for savings accounts, and allows you to compare rates fairly.
You might also see the ‘Gross’ interest rate shown – which will be less than the AER because it doesn’t show compound interest, just the flat rate of interest you’d get for the original amount you saved.
APR (borrowing)
Annual Percentage Rate (APR) shows the percentage you would have to pay on the money you borrow over the time it takes you to pay back the full loan. This is broken down into a rate per year.
APR is interest and any additional fees or charges added together. This means it’s a true reflection of what the debt will cost you, but it does mean you don’t know how much of the APR is interest, and how much is made up of charges.
SAVINGS ACCOUNTS
ISAs (Individual Savings Accounts): can be used for savings, just like a deposit account, but with a big advantage: you won’t pay tax on the interest you earn, or on any capital gain you make.
Regular savings account: you pay a regular monthly amount into the account and are likely to earn more interest than a standard savings account.
Standard savings account: more flexible than a regular savings account as you have instant access to your money, but the rate of interest will be lower.
If you are a tax payer then you will pay tax on both these accounts.
National Savings and Investments offer tax-free products like Premium Bonds and children’s savings accounts. These are backed by the government.
Stocks and shares: a stock is a stake in a company. If you buy a share of stock you are investing in the company and so if the company does well your investment allows you a share of the profit through a payment called a dividend. Of course the value of the shares will fall if the company doesn’t do well.
Stocks and shares ISAs: