What are the effects of rising interest rates on individuals and businesses making purchases?(1 point)

Question

Responses

Individuals are more willing to finance large purchases, but their consumption is not affected.
Individuals are more willing to finance large purchases, but their consumption is not affected.

They are more likely to delay making major purchases and save for them with a greater rate of return on their savings.
They are more likely to delay making major purchases and save for them with a greater rate of return on their savings.

Businesses are more likely to delay major purchases by saving for them using the greater rate of return on their stock investments.
Businesses are more likely to delay major purchases by saving for them using the greater rate of return on their stock investments.

They will save less and their purchases will remain unchanged.
They will save less and their purchases will remain unchanged.

Answer 1

The most accurate response regarding the effects of rising interest rates on individuals and businesses making purchases is:

They are more likely to delay making major purchases and save for them with a greater rate of return on their savings.

When interest rates rise, borrowing costs increase, making loans for large purchases, such as homes or vehicles, more expensive. As a result, individuals may choose to delay these purchases and save instead, benefiting from higher interest rates on their savings. Similarly, businesses may also delay significant capital expenditures for the same reasons.