A higher interest rate ___________ and __________.
A)reduces the present value of future income;reduces today's consumption
B)increases the present value of future income;increasing today's consumption
C)increases the discount rate;increases today's consumption
D)is an incentive to borrow more today;reduces future consumption
E)reduces inflation;consumers spend more today.

Question

Quizplus · Accepted Answer

A higher interest rate makes borrowing more expensive and saving more attractive. Therefore, individuals would reduce their consumption today to save more for the future. Additionally, a higher discount rate is used to calculate the present value of future income, which reduces its present value.

A Higher Interest Rate ___________ and __________

A Higher Interest Rate _ and