Question:
Which among the following statements is not true when there is an increase in interest rate in an economy?
Option A: increase in saving
Option B: decrease in loan
Option C: increase in production cost
Option D: increase in capital return
Show/Hide Answer and Explanation
Correct Answer: D
Explanation
Sol. Interest rate increase the cost of borrowing, which results in lesser investment activity and the purchase of consumer durables. In a low interest-rate environment, shares become a more attractive buy, raising households’ financial assets.