Asked by Areej Jamal on Jul 26, 2024
Verified
Which statement is true?
A) Usury laws hurt borrowers by forcing them to pay very high interest rates.
B) Usury laws hurt borrowers by preventing them from getting loans,albeit at higher rates of interest.
C) Usury laws hurt borrowers by making them into lenders.
D) Usury laws do not hurt borrowers.
Usury Laws
Regulations governing the maximum interest rate that can be charged on loans, intended to protect consumers from excessively high rates.
High Interest Rates
High interest rates refer to periods or situations where the cost of borrowing money is elevated, which can decrease consumer spending and business investment.
- Unpack how usury restrictions interface with interest rate configurations, and the resultant impacts on those borrowing and extending credit.
Verified Answer
BD
bhargav desaiJul 31, 2024
Final Answer :
B
Explanation :
Usury laws set a maximum limit on the interest rate that lenders can charge on loans. If this maximum limit is set too low, lenders may opt not to lend at all, particularly to high-risk borrowers. Thus, borrowers may be prevented from getting loans, even if they are willing to pay higher interest rates. Therefore, option B is the best choice as it captures this aspect accurately. Option A is incorrect as it assumes that usury laws allow for very high-interest rates, which is not the case. Option C is incorrect as it is not clear how usury laws make borrowers into lenders. Option D is incorrect as usury laws can have an impact on borrowers, as explained in option B.
Learning Objectives
- Unpack how usury restrictions interface with interest rate configurations, and the resultant impacts on those borrowing and extending credit.