An increase in the interest rate __________ purchases of consumer __________.
A) increases; durables
B) increases; nondurables
C) reduces; durables
D) reduces; nondurables

Question

Quizplus · Accepted Answer

An increase in interest rates will make it more expensive for consumers to take out loans or use credit for purchases, which reduces their ability and willingness to purchase durable goods such as homes and cars. Non-durables, on the other hand, are typically lower-priced items that are more likely to be purchased with cash or in the short-term, so an interest rate increase would have less of an impact on their sales.

An Increase in the Interest Rate __________ Purchases of Consumer