Question

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.

Answer 1

Interest rates on loans tend to be lower in a weak economy because (c)In a weak economy there is less demand for credit, so the price drops.

Step-by-step explanation: