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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?
lower than the equilibrium quantity, it not be binding.
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Hey, everyone, today we're answering. Ah, problem where? Basically, we know that interest rates cannot exceed 35%. I was something to draw that right here on, since it's can, it's a problem. Rising interest rates cannot exceed a certain percentage. It's going to be the equivalent of a price ceiling. Essentially, we're gonna have a price ceiling right here and again. That's that. The number of 35%. All right, So now you want to understand the effects of this pretty ceiling essentially on the amount of loans wheat and then the overall interest rate. Um, so with the amount of bones made, what we know is that the quantities of hide for loans is a lot less than the quantity borrowed with loans through demand. So consumers can borrow really want to borrow loans. But there's not enough in the labour market for them tomorrow. So since loans are having a shortage here, the number of loans the overall, um, number of loans is going to decrease you to the fact that there is a shortage of what's intuitive. Pretty Judit there on, then thing you off the interest rates well, the interest rates, which all just a review, and I are essentially since any loans that would be made in a normal labor market at that at interest rates that are higher than 35% anyone's that would have an interest rate higher than 35% are now no longer than could be made. So the overall average for interest rates will also decrease. So very happy. If you guys enjoy this explanation, please hit the like button next to it and have a nice day.
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