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Card 8 / 16: If a usury law limits interest rates to no more than 35%, what would the likely impact be on the amount of loans made and interest rates paid?
Answer:
If market interest rates stay in their normal range, an interest rate limit of 35% would not be binding. If the equilibrium interest rate rose above 35%, the interest rate would be capped at that rate, and the quantity of loans would be lower than the equilibrium quantity, causing a shortage of loans.
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Microeconomics, OpenStax-CNX Web site. Download for free at http://cnx.org/content/col11613/latest
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