Resolved: Equilibrium Interest Rate
Why's it that if the interest rate is low, borrowing us higher than savings and if the interest rate is high, savings is higher than borrowing?
1 answers ( 1 marked as helpful)
Lower interest rates attract more borrowers as cost of borrowing is low. So banks (lenders) lend more money.
But as interest rates increase, the cost of borrowing is high and borrowers are discouraged. So bank (lenders) savings are high.
But as interest rates increase, the cost of borrowing is high and borrowers are discouraged. So bank (lenders) savings are high.