The effects of rising interest rates on individuals and businesses making purchases generally include:
- They are more likely to delay making major purchases and save for them with a greater rate of return on their savings.
This option reflects a common response to higher interest rates, as individuals and businesses may choose to save more due to the opportunity cost of borrowing becoming more expensive.
- Businesses are more likely to delay major purchases by saving for them using the greater rate of return on their stock investments.
This option indicates that businesses might hold off on large expenditures in favor of investing or saving to take advantage of better returns, a typical reaction to rising interest rates.
The other options do not accurately capture the typical effects of rising interest rates. Specifically:
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"Individuals are more willing to finance large purchases, but their consumption is not affected." is incorrect, as rising interest rates generally make financing more expensive, which can dampen consumption.
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"They will save less and their purchases will remain unchanged." is also incorrect, as higher interest rates typically encourage more saving, not less.
Therefore, the correct responses are the first two listed above.