Final answer:
It is false that banks always use the current Prime Rate to calculate interest on loans given to customers. The prime rate is generally for the most creditworthy customers, and the rate a person receives depends on various factors. To determine the best years for lending or borrowing, comparison of nominal interest rates to inflation rates is crucial.
Step-by-step explanation:
It is false that when you get a loan from the bank, they would always use the current Prime Rate to calculate interest. The prime rate is a benchmark used by banks to set rates on various forms of loans, but not all borrowers will receive the prime rate. Typically, banks reserve the prime rate for their most creditworthy customers. The rate you receive on a loan may be higher than the prime rate, depending on various factors including credit score, loan type, and market conditions.
When considering the best years to be a lender or a borrower, one must look at the difference between the nominal interest rates and inflation rates. In general, it's best to lend when nominal interest rates are high relative to inflation, since this means you receive more in real interest payments. Conversely, it's best to borrow when nominal interest rates are low relative to inflation, since inflation can erode the real value of the amount you have to repay over time.
Moreover, the prime rate is influenced by the federal funds rate, which is set by the Federal Reserve and is not typically negative. However, during the 2008-2009 recession, the federal funds rate fell dramatically, which led to lower borrowing costs for banks which could indirectly benefit the borrowers as well.