Economics Principles For A Changing World
4th Edition
ISBN: 9781464186660
Author: CHIANG, Eric P.
Publisher: Worth Publishers,
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Question
Chapter 20, Problem 1QP
To determine
Explain the impact of increasing interest rates on consumer spending.
Expert Solution & Answer
Explanation of Solution
The interest rate is the cost of borrowing loans. A higher interest rate indicates that the cost of borrowing on loans or credit card will rise. As a result, the consumer will reduce their credit purchases. Hence, the total consumer spending will decrease. Therefore, due to the impact of rising interest rate, the consumer spending will reduce.
Economics Concept Introduction
Consumer spending: Consumer spending is one of the components of aggregate demand. It indicates the spending on goods and services out of a household’s current income.
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Chapter 20 Solutions
Economics Principles For A Changing World
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