Which of the Following Best Explains Why Consumption Expenditures Are

question 53

Multiple Choice

Which of the following best explains why consumption expenditures are affected by real interest rates?

• A)Higher real interest rates make it more expensive to finance the purchase of a new home.
• B)When interest rates are high, banks stop lending to households.
• C)An increase in real interest rates encourages people to save a larger proportion of their income, which means there is less income for consumption.
• D)When real interest rates are low, it is more difficult for households to borrow money because the supply of savings is low.
• E)When real interest rates are high, it is more difficult for households to borrow money because the supply of savings is low.

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Definitions:

Dilation of the Pupil

The process where the pupil enlarges to allow more light to enter the eye, often in response to low light conditions or certain emotional states.

Chemical Changes

Reactions that result in the transformation of substances into one or more different substances, involving the making and breaking of chemical bonds.

Top-down Processing

A cognitive process that uses context and pre-existing knowledge to understand information.

Constriction

The act or process of drawing together or becoming narrower; it can apply to physical objects, bodily processes, or even psychological states.