Interest sensitive consumption is negatively impacted by interest rates because when you
A)pay cash for something, the price you really pay depends on the interest rate.
B)buy something on installments (like a car)your payments are positively related to the interest rate so a higher interest rate would mean a higher payment, and therefore, less interest sensitive consumption.
C)buy something on installments (like a car)your payments are negatively related to the interest rate so a higher interest rate would mean a higher payment, and therefore, less interest sensitive consumption.
D)buy something you really need, the price you really pay depends on the interest rate.

Question

Quizplus · Accepted Answer

Interest sensitive consumption refers to consumer spending that is sensitive to changes in interest rates. When interest rates are high, borrowing becomes more expensive which reduces the amount of money consumers can spend. When buying something on installments, such as a car, a higher interest rate will lead to higher monthly payments, which would result in less money available for other discretionary purchases, thus reducing interest sensitive consumption. Therefore, the correct option is B.

Interest Sensitive Consumption Is Negatively Impacted by Interest Rates Because