An increase in interest rates will usually,ceteris paribus,

Question

Quizplus · Accepted Answer

An increase in interest rates makes borrowing more expensive, which tends to decrease consumption spending as people and businesses are less likely to take on new loans for purchases. Higher interest rates may also make saving more attractive, which could reduce consumption spending further. Investment spending may increase if higher interest rates improve the returns on investments, but this is not a guaranteed outcome. Government spending and net exports are not directly affected by changes in interest rates.

An Increase in Interest Rates Will Usually,ceteris Paribus