If interest rates increase, business investment expenditures are likely to ________ and consumer durable expenditures are likely to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

When interest rates increase, the cost of borrowing money rises for both businesses and consumers. This typically leads to a decrease in business investment expenditures as financing new projects or expansions becomes more expensive. Similarly, consumer durable expenditures, such as on cars or appliances that are often financed, are likely to decrease as the cost of loans increases.

If Interest Rates Increase, Business Investment Expenditures Are Likely to ________