What Effect Do Higher Interest Rates Have on Consumer Spending

question 157

Multiple Choice

What effect do higher interest rates have on consumer spending?

• A) Consumer spending increases as people try to quickly buy goods before rates go even higher.
• B) Consumer spending decreases immediately, but then rises sharply after consumers get used to the new higher interest rates.
• C) Consumer spending is not impacted by changes in interest rates.
• D) Consumer spending decreases.
• E) It is not possible to tell from the information given.

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Definitions:

Higher-order Conditioning

A complex form of classical conditioning where a stimulus previously paired with a primary unconditioned stimulus becomes a conditioned stimulus for further training.

Extinction

In psychology, the process through which a conditioned response decreases or disappears after the conditioned stimulus is repeatedly presented without the unconditioned stimulus.

Higher-order Conditioning

A learning process in which a stimulus that was previously neutral is paired with a conditioned stimulus to produce the same conditioned response as the original conditioned stimulus.

Neutral Stimulus

A stimulus that initially produces no specific response other than focusing attention, until it is associated with an unconditioned stimulus.