Low interest rates encourage which behavior, and high interest rates encourage which opposite behavior?

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Study for the McKissock Basic Appraisal Principles Test. Utilize flashcards and multiple choice questions, each enriched with hints and explanations, to master the key concepts of the appraisal process and prepare effectively for your exam!

Multiple Choice

Low interest rates encourage which behavior, and high interest rates encourage which opposite behavior?

Explanation:
Interest rates affect the cost of money and the return on deposits. When rates are low, borrowing is cheaper, so people and businesses are more likely to take out loans and spend—think mortgages, auto loans, and business financing. When rates rise, borrowing becomes expensive and saving earns more, so people tend to save rather than borrow. The natural pairing is borrowing when rates are low and saving when rates are high.

Interest rates affect the cost of money and the return on deposits. When rates are low, borrowing is cheaper, so people and businesses are more likely to take out loans and spend—think mortgages, auto loans, and business financing. When rates rise, borrowing becomes expensive and saving earns more, so people tend to save rather than borrow. The natural pairing is borrowing when rates are low and saving when rates are high.

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