An increase in the interest rate should
A)increase investment spending.
B)decrease consumption spending.
C)increase government spending.
D)increase net exports.

Question

Quizplus · Accepted Answer

An increase in the interest rate makes borrowing more expensive, which reduces consumption spending as it becomes costly for individuals and businesses to borrow money to finance purchases. This can lead to a decrease in economic growth and investment spending.  It does not necessarily affect government spending or net exports.

An Increase in the Interest Rate Should