At the beginning of 2017, Joey planned to buy a new iPhone, LCD TV, and motorcycle by borrowing money. Joey already owes $25,000 on other loans. He also planned to buy new clothing and DVDs out of current income. An increase in interest rates, during 2017, will most likely
A) cause Joey to decide to borrow less money, but not change what he planned to spend on goods purchased with current income.
B) cause Joey to decide to borrow more money and to spend more on goods purchased with current income.
C) cause Joey to decide to borrow more money, but not change what he planned to spend on goods purchased with current income.
D) cause Joey to decide to borrow less money and to spend less on goods purchased with current income.

Question

Quizplus · Accepted Answer

An increase in interest rates means that borrowing money would become more expensive for Joey. Therefore, he would most likely decide to borrow less money and as a result, spend less on goods purchased with current income. This means that he may have to reduce the amount he planned to spend on purchasing new clothing and DVDs with his current income as well.

At the Beginning of 2017, Joey Planned to Buy a New