Higher interest rates will adversely impact spending because. A. Household expen

Question

Higher interest rates will adversely impact spending because.

A. Household expenditures on consumer durables such as autos, housing, RVs, etc. will decline.

B. Most consumers borrow money for consumer durable purchases and with higher interest rates monthly payments will increase on these items.

C. Most households have minimum monthly payments on prior credit purchases which are tied to the interest rate.

D. Higher interest rates will increase the borrowing cost to businesses in obtaining funds for investment purchases.

E. All of the above are true.

Explanation / Answer

Higher interest rates encourage savings and therefore reduce consumption

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