3.2.3

Question 1

interest rate

Answer 1

the cost of borrowing money- it is paid by borrower and paid to savers

Question 2

what happens to the amount of consumers who save when interest rates rise?

Answer 2

this will increase as they will get more interest in their savings account

Question 3

what happens to the amount of consumers who spend when interest rates rise?

Answer 3

this will decrease as they will be influenced to save more

Question 4

what happens to the amount of consumers who borrow money when interest rates rise?

Answer 4

this will decrease as it will cost more to borrow money

Question 5

what happens to the amount of businesses who borrow money when interest rates rise?

Answer 5

this will decrease as it will cost more to borrow money

Question 6

overall a rise in interest rates:

Answer 6

-reduces spending by consumers
-reduces investments by businesses as it’s more expensive to take out a loan
-may lead to a weaker economic climate