Why Do Interest Rates Follow the Business Cycle

Multiple Choice

Why do interest rates follow the business cycle?

A) Typically, the Fed tightens credit to stimulate the economy, which puts further downward pressure on interest rates.
B) Interest rates tend rise during economic expansion and decline during recessions.
C) During an expansion, there is downward pressure on interest rates as businesses begin to grow and borrow more money.
D) During a recession, the demand for goods and services is lower, businesses borrow more, and as a result the economy slows down and the interest rates decline.