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Chapter 4: Q 25. (page 105)

If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who would lose?

Short Answer

Expert verified

In this situation, there is an effect on both the lenders and borrowers.

Step by step solution

01

Step 1. Given information

The government imposed a federal interest rate ceiling of 20% on all loans.

02

Step 2. Definition

A price ceiling is referred to as a necessary most amount which a seller will be able to charge for their products and services. This is a kind of price control method.

03

Step 3. Explanation

This situation will affect lenders in a negative way as because of this price ceiling they will get less interest for the loans they provided.

On the other hand, in this situation, the borrowers are benefitted because now they are able to borrow more funds with less interest rates.

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Most popular questions from this chapter

In the labor market, what causes a movement along the supply curve? What causes a shift in the supply curve?

Suppose the U.S. economy began to grow more rapidly than other countries in the world. What would be the likely impact on U.S. financial markets as part of the global economy?

A price ceiling will have the largest effect:

a. substantially below the equilibrium price

b. slightly below the equilibrium price

c. substantially above the equilibrium price

d. slightly above the equilibrium price

In the financial market, what causes a movement along the demand curve? What causes a shift in the demand?

Under what circumstances would a minimum wage be a nonbinding price floor? Under what circumstances would a living wage be a binding price floor?
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