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

Question

Responses

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 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 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 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 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.

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.

This is the correct explanation; when interest rates are low, the cost of borrowing money is cheaper, which can stimulate borrowing for investments, purchases, or other financial needs. Conversely, lower interest rates tend to provide less incentive to save, as the returns on savings accounts and other fixed-income investments are diminished.