A higher interest rate _____ consumption, investment, and _____, which _____ aggregate demand.
A) decreases; exports; decreases
B) decreases; imports; decreases
C) increases; exports; increases
D) increases; imports; increases

Question

Quizplus · Accepted Answer

A higher interest rate decreases consumption and investment as it makes borrowing more expensive. This leads to a decrease in aggregate demand. As for exports and imports, it depends on the specific country's situation, but generally a higher interest rate tends to make that country's currency stronger, making exports more expensive and imports cheaper, thus leading to a decrease in exports and an increase in imports.

A Higher Interest Rate _____ Consumption, Investment, and _____, Which

A Higher Interest Rate _ Consumption, Investment, and _, Which