A lower level of income in all sectors of the economy causes the demand for funds to _______ and the interest rate to _____.
A) increase; rise
B) decrease; fall
C) increase; fall
D) decrease; rise

Question

Quizplus · Accepted Answer

When the level of income decreases for all sectors, people and businesses have less money to spend and invest. As a result, the demand for funds decreases, causing the interest rate to fall. This is because lenders now have more money and less demand, so they lower the interest rate to attract borrowers.

A Lower Level of Income in All Sectors of the Economy