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

Question

Responses

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.
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 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.

Answer 1

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.

When interest rates are low, the cost of borrowing is reduced, making loans more accessible and attractive for individuals and businesses. This typically stimulates borrowing for spending on big-ticket items such as homes or cars, and for investment in business expansion. Conversely, low interest rates can discourage saving, as the returns on savings accounts and other savings instruments are also lower. Thus, individuals may prefer to spend or invest rather than save.