A higher real interest rate ________ investment spending and ________ consumption spending.
A)increases; increases
B)increases; decreases
C)decreases; decreases
D)decreases; increases

Question

Quizplus · Accepted Answer

Because most investment spending requires financing, a higher real interest rate decreases investment. But because higher interest rates encourage saving, they also decrease consumption.

A Higher Real Interest Rate ________ Investment Spending and ________

A Higher Real Interest Rate Investment Spending and