Question

If the government imposed a federal interest rate ceiling of 20% on all loans, who would gain and who would lose?

Short answer

In this situation, there is an effect on both the lenders and borrowers.

Step-by-step solution

Step 1. Given information

The government imposed a federal interest rate ceiling of 20% on all loans.

Step 2. Definition

A price ceiling is referred to as a necessary most amount which a seller will be able to charge for their products and services. This is a kind of price control method.

Step 3. Explanation

This situation will affect lenders in a negative way as because of this price ceiling they will get less interest for the loans they provided.

On the other hand, in this situation, the borrowers are benefitted because now they are able to borrow more funds with less interest rates.