The rise in interest rates generated by the effect of government borrowing will cause which of the following?

Question

Quizplus · Accepted Answer

An increase in interest rates will increase the cost of borrowing for businesses, making investment spending less attractive. This can lead to a decrease in investment spending. A) is incorrect because increased interest rates discourage consumption spending. C) is incorrect because higher interest rates mean higher mortgage rates, which would decrease the demand for mortgages and cause rates to go up. D) is incorrect because higher interest rates lead to a stronger currency, which can decrease net exports.

The Rise in Interest Rates Generated by the Effect of Government