Slowing economic activity by increasing interest rates will generally be successful since
A)investment spending will be reduced
B)spending on durable goods will be reduced
C)aggregate supply will decrease
D)all of the above
E)only A and B

Question

Quizplus · Accepted Answer

Increasing interest rates will cause businesses and individuals to reduce their borrowing and investment spending, which will lead to a reduction in spending on durable goods. This will slow economic activity, as less money is being spent on goods and services. However, it does not necessarily mean that aggregate supply will decrease, as this will depend on the overall state of the economy and the factors influencing production.

Slowing Economic Activity by Increasing Interest Rates Will Generally Be