Question

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

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 borrowers by savers, so a low interest rate means a low opportunity cost for borrowing.

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 savers by borrowers, 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 savers by borrowers, 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.

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.

Answer 1

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. When interest rates are low, the cost of borrowing decreases, making it more attractive for people to take out loans for things like homes, cars, or starting a business. Conversely, low interest rates often result in lower returns on savings, which can discourage saving. Therefore, the correct response is that a low interest rate encourages borrowing rather than saving.