Ace the Canadian Securities Course 2025 - Rock the CSC Practice Exam!

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Question: 1 / 400

What effect do higher interest rates typically have on the economy?

Boost investment

Encourage consumer spending

Lead to economic growth

Discourage consumer spending

Higher interest rates actually tend to discourage consumer spending as it becomes more expensive to borrow money. Increased interest rates can lead to less consumer borrowing, which in turn can slow the economy and economic growth. On the other hand, it may encourage saving and decrease inflation, which can have positive effects on the economy in the long term. While higher interest rates may boost investment in certain sectors, it can also discourage businesses from borrowing money for expansion, resulting in a negative impact on economic growth. Higher interest rates can also make it more expensive for businesses to finance projects, making it less likely for them to take on new ventures and stimulate economic activity. Therefore, option D is the most accurate choice.

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