Question

if the domino effect occurs as a result of changes in the money supply, what will most likely happen as an immediate result of interest rates being increased?
○ borrowing will decrease.
○ investing will decrease.
○ inflation will increase.
○ liquidity will increase.

Explanation:

When interest rates increase, the cost of borrowing money (like loans) rises. So, from a borrower's perspective, it becomes less attractive or more expensive to take on debt. This leads to a decrease in the amount of borrowing. Investing decreasing is a subsequent effect (as less borrowing can lead to less investment), inflation increasing is unlikely (higher rates tend to curb inflation), and liquidity increasing is incorrect (higher rates make money less liquid as borrowing is down). The immediate effect of higher interest rates is reduced borrowing.

Answer:

A. Borrowing will decrease.