At Some Point, Further Increases in Interest Rates on Specific

question 36

True/False

At some point, further increases in interest rates on specific loans may decrease expected loan returns because of increased probability of default by the borrower.

---

Definitions:

Private Goods

Goods that are excludable and rivalrous in consumption, meaning their use by one individual prevents use by another.

Normal Goods

Goods for which demand increases as the income of the buyer increases and decreases as the income of the buyer decreases, showing a positive correlation between income changes and demand.

Overallocation

The process of assigning more resources to a project or sector than is available or sustainable, leading to inefficiencies.

Underallocation

A situation where resources are not distributed efficiently, resulting in potential benefits not being fully realized.