A higher interest rate
A)increases the motivation to delay consumption and, therefore, save.
B)increases the motivation to delay consumption and, therefore, borrow.
C)decreases the motivation to delay consumption and, therefore, save.
D)decreases the motivation to delay consumption and, therefore, borrow.

Question

Quizplus · Accepted Answer

A higher interest rate incentivizes saving over borrowing because it increases the return on saving, making it more attractive to delay consumption and save. On the other hand, borrowing becomes more expensive, decreasing the motivation to borrow.

A Higher Interest Rate