Question

The interest rate effect: is the change in exports and imports, resulting from changes in the interest rate caused by changes in the aggregate price level. is the change in consumer and investment spending due to changes in interest rates resulting from changes in the aggregate price level. is the change in interest rates, caused by changes to government purchases. is the change in real GDP caused by the Federal Reserve adjusting target interest rates. is the change in investment spending and government purchases caused by changes in money demand.

Answer 1

Answer:

The interest rate effect is the change in consumer and investment spending due to changes in interest rates resulting from changes in the aggregate price level.

Explanation:

"Changes in interest rates can have different effects on consumer spending habits depending on a number of factors, including current rate levels, expected future rate changes, consumer confidence, and the overall health of the economy.

It's possible for interest rate changes, either up or down, to have the effect of increasing consumer spending or decreasing spending and increasing saving. The ultimate determinant of the overall effect of interest rate changes primarily depends on the consensus attitude of consumers as to whether they are better off spending or saving in light of the change. "

Reference: Maverick, J.B. “How Do Interest Rates Change Spending Habits in the Economy?” Investopedia, Investopedia, 31 Aug. 2019