How does an increase in the interest rate affect the demand for goods and services?
A) It increases the cost of borrowing and people consume more.
B) It decreases the cost of borrowing and people consume more.
C) It increases the cost of borrowing and people consume less.
D) It decreases the cost of borrowing and people consume less.

Question

Quizplus · Accepted Answer

An increase in the interest rate increases the cost of borrowing for consumers, making borrowing and consumption more expensive. This can lead to a decrease in demand for goods and services as consumers may choose to save more instead of borrowing and spending.

How Does an Increase in the Interest Rate Affect the Demand