The interest rate at which businesses borrow to fund their investments is higher than the real interest rate for short-term,safe loans,because ________.
A)business borrowers sometimes default on their loans
B)autonomous investment is not dependent on borrowed funds
C)the central bank controls the short-term,safe interest rate
D)the interest rate is negatively-related to business optimism
E)all of the above

Question

Quizplus · Accepted Answer

The higher interest rate charged for business loans reflects the greater risk that borrowers may default on their loans, compared to short-term, safe loans. This risk of default increases the cost of borrowing for businesses, resulting in a higher interest rate.

The Interest Rate at Which Businesses Borrow to Fund Their