For a usury law to be effective, the interest rate must be

Question

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A usury law places a legal maximum on the interest rate that can be charged on a loan. If this maximum is set above the market equilibrium interest rate, lenders have no incentive to make loans, because they can earn a higher return by investing their money elsewhere. If the maximum is set at the market equilibrium rate, no change will occur. However, if the maximum is set below the market equilibrium rate, lenders may still be willing to make loans, but borrowers will pay a lower rate than they otherwise would have. Therefore, to be effective, a usury law must be set below the market equilibrium rate.

For a Usury Law to Be Effective, the Interest Rate