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Evaluating Loan Regulation Policies
A government is considering two different policies to regulate one-year loans. Policy A would cap the total extra amount a borrower must repay at $150, regardless of the loan size. Policy B would cap the interest rate at 12%. Evaluate the effectiveness of each policy in protecting a borrower who takes out a small loan ($500) versus a borrower who takes out a large loan ($2,500). Which policy do you believe is more equitable across different loan sizes? Justify your answer using calculations.
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Ch.6 The financial sector: Debt, money, and financial markets - The Economy 2.0 Macroeconomics @ CORE Econ
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