Final answer:
Interest rates can indeed be less than 1% and can even be negative, as seen with the U.S. Federal Reserve during the 2008-2009 recession. Negative interest rates are used to stimulate the economy during downturns. Lower interest rates will not necessarily lead to lower financial savings for all individuals, as savings behavior can be influenced by factors other than interest rates.
Step-by-step explanation:
Contrary to the belief that an interest rate cannot be less than 1%, it is actually possible for interest rates to be lower than that, and even negative. Negative interest rates are an unconventional monetary policy tool where central banks set nominal target interest rates below zero. This means lenders do pay borrowers for taking loans, encouraging spending and investment during economic downturns. The concept of negative interest rates was witnessed during the 2008-2009 recession when the U.S. Federal Reserve drastically reduced the federal funds rate to stimulate the economy.
As for the general rule suggesting that a lower interest rate will encourage lower financial savings, this is not necessarily true for all individuals. People save for various reasons, and the interest rate is just one of the factors influencing this decision. For instance, during times of economic uncertainty, individuals might still save more despite low or negative interest rates due to a desire for financial security.
In terms of usury laws and their impact on loans and interest rates, if a usury law limits interest rates to no more than 35%, this could result in several changes. High-risk borrowers might find it easier to obtain loans, as lenders can still charge a relatively high annual percentage rate (APR) to compensate for the risk. However, extreme caps can also lead to a decrease in the availability of credit, as lenders may be unwilling to lend at rates that do not adequately compensate for the risk of default.