What does economic growth typically influence regarding credit risk?

Economic growth typically leads to lower credit risk due to improved financial conditions for businesses and consumers. When an economy is growing, companies often experience increased revenues and profitability, which enhances their ability to meet financial obligations, including debt repayments. Additionally, individual consumers generally have better employment prospects and income growth during periods of economic expansion, translating into a higher likelihood of meeting mortgage payments and other loan repayments.

As corporate and consumer financial health improves, lenders perceive a decreased risk of defaults on loans. Consequently, this reduces the overall credit risk associated with lending. The perception of lower credit risk can also lead to more favorable lending terms, such as lower interest rates, as lenders feel more secure in extending credit.

In contrast, options suggesting increased likelihood of defaults and independence from market conditions do not align with the economic principles associated with growth periods. Similarly, the notion of higher interest rates across the board may occur due to factors like inflation or central bank policy adjustments, but it is not a direct outcome of economic growth impacting credit risk. Thus, the correct answer reflects the positive correlation between economic growth and credit risk mitigation.