# Rate of Interest ## Definition The price paid for the use of borrowed capital, typically expressed as a percentage of the principal per year. This rate is determined by the balance between the supply of lendable capital and the demand for its use in productive enterprises. ## Source Chapter Book II, Chapter 4 ## Context Smith provides a comprehensive analysis of how interest rates are determined, arguing that they naturally fall as the quantity of capital in a country increases and profitable employment opportunities become scarcer. ## Economic Domain Distribution ---