Question

One disadvantage of an environment of low interest rates is that

Answer 1

The correct answer is "people have less incentive to save money in banks."

Further Explanation:

When interest rates are low people tend to spend the money they are saving instead of saving money. The risk free rate is typically decided by the Treasury securities.

There are some downfalls to having an environment of low interest rates. One drawback is lower borrowing rates that affect investments. The banks will have a decrease in people depositing money, but will have an advantage of lower rates. People take on more debt when the interest is down.

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