Answer:
❤️Higher interest rates increase the cost of borrowing, reduce disposable income and therefore limit the growth in consumer spending. Higher interest rates tend to reduce inflationary pressures and cause an appreciation in the exchange rate.❤️
Explanation:
-With higher interest rates, interest payments on credit cards and loans are more expensive.
-Increase in mortgage interest payments.
-Increased incentive to save rather than spend. Higher interest rates make it more attractive to save in a deposit account because of the interest gained.
-Rising interest rates affect both consumers and firms. Therefore the economy is likely to experience falls in consumption and investment.
-Reduced confidence. Interest rates affect consumer and business confidence. A rise in interest rates discourages investment; it makes firms and consumers less willing to take out risky investments and purchases.
