Everything else equal, which of the following actions would tend to increase interest rates in the financial markets?
A)Investors' time preferences for consumption increase.
B)Investors are exposed to fewer economic risks.
C)Production opportunities decrease throughout the economy.
D)The overall creditworthiness of borrowers improves significantly.
E)The default probabilities of corporations decline substantially.

Question

Quizplus · Accepted Answer

When investors' time preferences for consumption increase, they prefer to consume now rather than later, leading to a higher demand for funds and thus higher interest rates.

Everything Else Equal, Which of the Following Actions Would Tend