Question

3. To a household, what kinds of spending are sensitive to interest rate fluctuation? Please provide at least two examples with a brief explanation.

your own words.

Answer 1

Answer- First example is spending on durable goods by the household are sensitive to interest rate fluctuation.Durable goods that are used for the long time period. Durable goods include expenditure on vehicles , enjoyment goods. This spending need to borrow money from banks due to less savings with the households and increase the interest rate.

Second example is spending on investment activities like purchase of house, factories. In this, household need money and in case of shortage of money , households rely on the borrowing and increases the interest rate.

answered by: anonymous