Question

Does a low interest rate encourage people to borrow or to save? Explain.(1 point)
Responses

A low interest rate encourages people to save because interest rates are paid to savers by borrowers, so a low interest rate means a low opportunity cost for saving.


A low interest rate encourages people to save because interest rates are paid to borrowers by savers, so a low interest rate means a low opportunity cost for saving.


A low interest rate encourages people to borrow because interest rates are paid to borrowers by savers, so a low interest rate means a low opportunity cost for borrowing.


A low interest rate encourages people to borrow because interest rates are paid to savers by borrowers, so a low interest rate means a low opportunity cost for borrowing.

Answer 1

A low interest rate encourages people to borrow because it means that they can borrow money at a lower cost. With lower interest rates, the cost of borrowing decreases, making it more attractive for individuals to take out loans for purchases such as homes or cars. Additionally, low interest rates can also incentivize businesses to borrow money for investments and expansion, which can stimulate economic growth.