Interest rates are countercyclical if the effect of GDP growth on investors in bonds is stronger than the effect on firms issuing bonds.

Question

Quizplus · Accepted Answer

Interest rates are considered countercyclical if they tend to decrease during economic expansions and increase during recessions. If GDP growth affects investors more strongly, they may demand higher interest rates for bonds, leading to a countercyclical pattern.

Interest Rates Are Countercyclical If the Effect of GDP Growth