At higher rates of interest
A) households save less and businesses invest more.
B) households save less and businesses invest less.
C) households save more and businesses invest less.
D) households save more and businesses invest more.

Question

Quizplus · Accepted Answer

At higher rates of interest, households have an increased incentive to save as they will receive a higher return on their savings. On the other hand, businesses may be less likely to invest as the cost of borrowing increases. Therefore, households save more and businesses invest less.

At Higher Rates of Interest