Many people believe that a high interest rate is bad for the economy. Of course, all else equal, a higher interest rate means greater borrowing costs for firms. But a high interest rate is also helpful to some people in the economy.

a. What group of people benefits from a higher interest rate? Explain how they benefit.

b. A high interest rate can also indicate that something positive is happening in the economy. Describe how positive factors can lead to an increase in the demand for loanable funds and then an increase in the interest rate.