Mathematics

Ashton Montoya

4 June, 09:26

Why do interest rates on loans tend to be lower in a weak economy than in a strong one?

a.

A weak economy tends to have low inflation, so interest rates drop to match.

b.

Borrowers in a weak economy are less likely to default on their loans, so interest rates are correspondingly low.

c.

In a weak economy there is less demand for credit, so the price drops.

d.

The strength or weakness of an economy is determined by interest rates; low interest rates actually cause a weak economy.