A Rise in the Real Interest Rate Will Cause Consumer

question 19

Multiple Choice

A rise in the real interest rate will cause consumer spending to

• A)decline.
• B)not change.
• C)rise.
• D)rise at first, then decline later.

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Definitions:

Market Rate

The prevailing interest rate available in the market for loans or the rate at which other financial instruments are priced, often influenced by the supply and demand for money.

Shortage

A situation where the demand for a product or service exceeds the available supply.

Loanable Funds

The funds available for borrowing in the financial markets, consisting of savings and monies not yet invested, influencing interest rates and investment through supply and demand.

Supply And Demand

The fundamental economic model that explains how the interaction between the supply of a good or service and consumer demand determines its price.