this is a 8 marks questions...what shall i write?
2007-10-24 03:57:38 · 4 answers · asked by Anonymous in Social Science ➔ Economics
When the interest rate increases, people are more inclined to save their money to take advantage of the high interest rate (they will get more return on their savings). They will borrow less money because it will cost more to do so because of the high interest rate. So overall, expenditure decreases and savings increases.
2007-10-24 04:04:45 · answer #1 · answered by Toot 3 · 0⤊ 0⤋
Household expenditure would drop. People would be paying out more money in the increased interest, therefore they have less spending money. The law of demand states that demand drops when consumer incomes drop (or in this case a larger chunk of that income is being taken off the top).
2007-10-24 05:44:43 · answer #2 · answered by ajfrederick9867 4 · 0⤊ 0⤋
the consumer confidence drops / poeple spend less money
2007-10-24 04:03:08 · answer #3 · answered by Mildred S 6 · 0⤊ 1⤋
mostly credit card payments and eventually adjustable rate mortgages.
2007-10-24 04:05:16 · answer #4 · answered by Fresh 3 · 0⤊ 1⤋