An Increase in the Interest Rate

question 65

Multiple Choice

An increase in the interest rate:

• A) reduces planned investment, because the interest rate is the cost of borrowing to finance investment projects.
• B) increases planned investment, because people who make money from interest have more money to invest.
• C) has no effect on investment.
• D) may be caused by a drop in investment demand.

---

Definitions:

Loan Available

The amount of money that a lender is willing to provide to a borrower under agreed conditions.

Life Policy

An insurance agreement that provides financial compensation to a designated beneficiary upon the insured individual’s death.

Insured

A person, organization, or entity covered under an insurance policy, protecting them against specific risks or losses.

Quarterly Premiums

Insurance payments made every three months to maintain coverage, often used in health, life, and property insurance policies.