An increase in the real interest rate will decrease consumption and investment.

Name: An increase in the real interest rate will decrease consumption and investment.
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Question

Quizplus · Accepted Answer

This is because higher real interest rates increase the cost of borrowing, which decreases consumption and investment. When interest rates are high, individuals and businesses are less likely to borrow money for purchases or investments, which reduces spending overall.

An Increase in the Real Interest Rate Will Decrease Consumption