The Interest Rate Effect Predicts That Higher Prices

Multiple Choice

The interest rate effect predicts that higher prices:

A) make it more expensive to borrow, leading to higher interest rates and less investment.
B) make people worse off by reducing the value of their wealth, leading them to save more and spend less.
C) decrease borrowing, leading to higher interest rates and less investment.
D) decrease borrowing, leading to lower interest rates and more investment.
E) increase borrowing, leading to higher interest rates and less investment.