What effect do higher interest rates have on consumer spending?
A) Consumer spending increases as people try to quickly buy goods before rates go even higher.
B) Consumer spending decreases immediately, but then rises sharply after consumers get used to the new higher interest rates.
C) Consumer spending is not impacted by changes in interest rates.
D) Consumer spending decreases.
E) It is not possible to tell from the information given.

Question

Quizplus · Accepted Answer

Higher interest rates mean that borrowing money becomes more expensive, which leads to decreased consumer spending. Consumers are likely to reduce their spending in order to save money and pay off debts, which impacts businesses and the overall economy.

What Effect Do Higher Interest Rates Have on Consumer Spending