Which statement best describes loans with longer repayment periods?
Loans with longer repayment periods have lower monthly payments, lower interest rates, and lower costs of borrowing.
Loans with longer repayment periods have lower monthly payments but higher interest rates and higher costs of borrowing.
Loans with longer repayment periods have higher monthly payments, lower interest rates, and lower costs of borrowing.
Loans with longer repayment periods have higher monthly payments, higher interest rates, and higher costs of borrowing.
Loans with longer repayment periods have lower monthly payments but higher interest rates and higher costs of borrowing.
The statement "Loans with longer repayment periods have lower monthly payments but higher interest rates and higher costs of borrowing" best describes loans with longer repayment periods.
The statement "Loans with longer repayment periods have lower monthly payments, lower interest rates, and lower costs of borrowing" best describes loans with longer repayment periods.
To understand this better, let's break down the components:
1. Monthly payments: When you have a longer repayment period, such as 10 or 15 years, the total loan amount is spread over a larger number of months. As a result, each monthly payment becomes smaller, making it more manageable for the borrower.
2. Interest rates: Generally, loans with longer repayment periods tend to have lower interest rates. Lenders offer lower rates to borrowers who choose longer repayment periods because they have a longer time to make a profit from the interest charged.
3. Costs of borrowing: The longer the repayment period, the lower the overall costs of borrowing. This is because longer repayment periods result in smaller monthly payments, making it easier for borrowers to handle their financial obligations. As a result, borrowers are less likely to default on their payments, reducing the risk for lenders and potentially lowering any additional fees associated with borrowing.
Therefore, loans with longer repayment periods generally have lower monthly payments, lower interest rates, and lower costs of borrowing, making them more affordable for borrowers in the long run.
What is the marginal propensity to consume?
It is the proportion of each dollar of income earned that is spent.
It is the proportion of each dollar saved that is spent.
It is the proportion of each additional dollar of income earned that is saved.
It is the proportion of each additional dollar of disposable income earned that is spent.
The marginal propensity to consume is the proportion of each additional dollar of disposable income earned that is spent.
Summarize the effect of rising interest rates on consumers and businesses making purchases.
Businesses continue to make large purchases as their rate of return on their savings increases. Consumers generally tend to delay making major purchases as they benefit from a greater rate of return on their savings.
Consumers and businesses may finance large purchases while interest rates are still low. However, they are more likely to delay making major purchases and save for them with a greater rate of return on their savings.
Consumers and businesses continue to finance large purchases using loans with fixed interest rates but also enjoy a greater rate of return on their savings.
Consumers are more willing to finance large purchases while interest rates are still low, but their consumption is not affected. Businesses are more likely to delay making major purchases by saving for them using the greater rate of return on their stock investments.
Consumers and businesses may finance large purchases while interest rates are still low. However, they are more likely to delay making major purchases and save for them with a greater rate of return on their savings.
What are possible effects on home ownership from an increase in the federal funds rate? Explain.
The cost of borrowing on a mortgage increases, which leads to higher lending costs for first-time home buyers.
The cost of borrowing on a mortgage decreases, which allows more first-time home buyers to be homeowners.
Fewer first-time home buyers are able to purchase a home because higher interest rates on mortgages lead to higher home prices.
The cost of borrowing on a mortgage increases, leading to less accessibility of home ownership for first-time home buyers.