How Does an Increase in the Interest Rate Affect the Demand

question 126

Multiple Choice

How does an increase in the interest rate affect the demand for goods and services?

• A) It increases the cost of borrowing and people consume more.
• B) It decreases the cost of borrowing and people consume more.
• C) It increases the cost of borrowing and people consume less.
• D) It decreases the cost of borrowing and people consume less.

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Definitions:

Restocked Inventory

Inventory items that have been replenished or added to, typically after being sold or used up.

Total Carrying Costs

The sum of all expenses associated with holding a particular investment or inventory, including storage, interest, depreciation, and insurance.

Discounted Price

A reduced price below the original mark-up, often to encourage purchase or clear inventory.

Credit Terms

Conditions under which credit is extended by a lender to a borrower, including repayment terms and interest rates.