Higher interest rates will adversely impact spending because. A. Household expen
ID: 1225102 • Letter: H
Question
Higher interest rates will adversely impact spending because. A. Household expenditures on consumer durables such as autos, housing, RVs, etc. will decline. B. Most consumers borrow money for consumer durable purchases and with higher interest rates monthly payments will increase on these items. C. Most households have minimum monthly payments on prior credit purchases which are tied to the interest rate. D. Higher interest rates will increase the borrowing cost to businesses in obtaining funds for investment purchases. E. All of the above are true.
Explanation / Answer
E. All the above are true
Talking of households sometimes they borrow for buying consummer durables and sometimes they take it on credit. Both of them are tied to interest rates. Along with that businesses borrow for investments, higher interest rate would increase the cost of borrowing hence higher interest rates adversely impacts spending