The phenomenon that some consumers pay a higher interest rate when they borrow than the interest rate they receive when they lend is best described as an example of
A) irrational behaviour.
B) a credit market imperfection.
C) a vast banking conspiracy.
D) the burden of public debt.
E) competitive disequilibrium.

Question

Quizplus · Accepted Answer

This phenomenon is known as a credit market imperfection, which occurs when there are restrictions or barriers to accessing credit or when lenders have market power to charge higher interest rates. It is not necessarily irrational behaviour, a vast banking conspiracy, or related to public debt. Additionally, it does not necessarily indicate competitive disequilibrium.

The Phenomenon That Some Consumers Pay a Higher Interest Rate