When business firms become more pessimistic about the state of the economy,the interest rate _____ and the quantity of borrowing and lending _____.
A) increases;increases
B) increases;decreases
C) decreases;decreases
D) decreases;increases

Question

Quizplus · Accepted Answer

When business firms become more pessimistic about the state of the economy, they may reduce their investment and growth expectations, which reduces the demand for borrowing and lending. This leads to a decrease in the interest rate and the quantity of borrowing and lending. Therefore, the correct answer is C.

When Business Firms Become More Pessimistic About the State of the Economy,the