Isaiah is a net borrower when the interest rate is 5% and a net saver when the interest rate is 25%.An increase in the interest rate from 5 to 25% may make Isaiah worse off.

Question

Quizplus · Accepted Answer

When the interest rate increases from 5% to 25%, Isaiah becomes a net saver. However, if the increase in interest rate does not outweigh the decrease in disposable income (due to higher interest payments on loans), he may end up worse off overall. Therefore, an increase in interest rate may make him worse off.

Isaiah Is a Net Borrower When the Interest Rate Is