If the Interest Rate Increases, Then

question 53

Multiple Choice

If the interest rate increases, then

• A)households will decrease their level of saving.
• B)the supply of loanable funds will fall because it now costs more to borrow funds and people who were supplying the funds will realize that fewer people will be willing to borrow their funds.
• C)households will consume less and save more.
• D)government will consume more because it now costs more to borrow funds to buy goods.

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Definitions:

Inexpensive

Not costing a lot of money; affordable.

Cross-Sectional Design

A research method in which data is collected from a population, or a representative subset, at one specific point in time.

Longitudinal Study

A research design that involves repeated observations of the same variables (such as people) over short or long periods of time.

Early Thirties

A period in adult life approximately between the ages of 30 and 34, often associated with significant life transitions and decisions.