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Economics · May / June 2023 · Paper 11 · Question 12

2281Households

A country's central bank raised the rate of interest from 1% to 4% per year. How would this change have affected the amount saved and the cost of borrowing by individuals?

  1. Aamount saved decreased; cost of borrowing decreased
  2. Bamount saved decreased; cost of borrowing increased
  3. Camount saved increased; cost of borrowing decreased
  4. Damount saved increased; cost of borrowing increased

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Correct answer: D. amount saved increased; cost of borrowing increased

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