What is the reason for providing loans to the government at lower interest rates?

Welfare motive

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High credit worthiness

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Compulsion

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Financial crisis

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Solution

The correct option is B
High credit worthiness

Due to its high credit worthiness, the government can borrow at a lower interest rate. They can unilaterally reduce the rate of interest in the times of financial crisis.

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Similar questions

Q24. Consider the following statements about Credit Crunch:

1. An economic situation where banks and other financial institutions become extremely reluctant to provide loans to businesses.

2. An economic crisis where countries are not able to get funding from World Bank.

3. It also known as credit squeeze.

Which of the above statements are correct?

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