Higher interest rates
A) reduce total planned real expenditures because they increase the cost of borrowing funds.
B) reduce total planned real expenditures because they reduce the income of bankers and other creditors.
C) increase total planned real expenditures because they increase the incomes of all people in the economy.
D) increase total planned real expenditures because they lower the costs of building new plants and equipment.

Question

Quizplus · Accepted Answer

Higher interest rates increase the cost of borrowing funds, making it more expensive for people and firms to take out loans. This reduces their ability to spend and invest, leading to a decrease in total planned real expenditures.

Higher Interest Rates