Why do banks ration credit when interest rates become very high?
A)Banks have less money available when interest rates are high.
B)There are too many loan applications.
C)There are fewer depositors when interest rates are high.
D)Only high risk investors are willing to borrow at high rates.

Question

Quizplus · Accepted Answer

High interest rates deter low-risk borrowers, who are typically more cautious about taking on expensive debt. This leaves a pool of higher-risk borrowers willing to accept the high costs, prompting banks to ration credit to manage the increased risk of default.

Why Do Banks Ration Credit When Interest Rates Become Very