Final answer:
State laws that cap the interest rate a lender can charge are known as a price ceiling. These price ceilings are designed to prevent excessively high interest rates but are often set above market rates and only affect the market if actual rates exceed these caps.
Step-by-step explanation:
Laws that limit the maximum amount of interest that a lender can charge a borrower are an example of a price ceiling. Such laws, often referred to as usury laws, set a legal maximum on the interest rate that can be charged on loans. These price ceilings are intended to protect consumers from excessively high rates. If a price ceiling is set above the market equilibrium interest rate, it is considered nonbinding and will have no effect unless the market interest rate rises above the ceiling level.