Question

Lindsay has a low starting interest rate of 2%, but then slowly, over time, it journeys to a high interest rate. This is known as interest rate "________" and is very dangerous.

A. leap
B. creep
C. catapult
D. drop

Answer 1

B. creep

Step-by-step explanation:

This is the gradual increase in the rates of interest on various credit products and assets. It is gradual and thus may seem negligible, to the eye of an unkeen borrower. However, its downside is that it eventually makes the cost of capital very costly, making borrowing expensive and subsequently discouraging borrowing which is an essential aspect of economic growth. If it continues unabated, economic growth in an economy is slumped and to a certain level halted.