Which of the following statements is the most accurate about the spending allocation model?
A)Interest rates influence spending.
B)Spending influences interest rates.
C)There is no relationship between interest rates and spending.
D)Interest rates both influence and are influenced by spending.
E)The relationship between spending and interest rates is too uncertain to be modeled.

Question

Quizplus · Accepted Answer

Interest rates can influence spending by making it either more expensive or less expensive to borrow money. However, spending can also influence interest rates, as increased spending can lead to inflation and higher demand for credit, driving interest rates up. Therefore, the most accurate statement is that interest rates both influence and are influenced by spending.

Which of the Following Statements Is the Most Accurate About