Consumption Can Be Sensitive to Changes in the Real Interest

question 67

Multiple Choice

Consumption can be sensitive to changes in the real interest rate because:

• A)Higher interest rates can increase the cost of durable goods like automobiles.
• B)Higher interest rates will result in less saving.
• C)Lower real interest rates will decrease spending on durable goods and increase spending on non-durable goods.
• D)Lower interest rates increase savings.

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Definitions:

Cost-Push Inflation

Inflation caused by an increase in prices of inputs like labour, raw material, etc., leading to a decrease in the supply of these goods.

Variants

Different forms or versions of something, often used to describe mutations in viruses or diverse options of a product or service.

Business Cycle

The fluctuation in economic activity that an economy experiences over a period of time, consisting of expansion (growth) and contraction (recession) phases.

High Point

The highest value or peak that an economic indicator or a market index reaches over a specific time period.