Question

How do changes in the market interest rate affect business spending and consumer spending?

Answer 1

Market interest rates plays very vital role in the business and consumer spending because both businesses and consumer take loans for investments and consumption, so any change in interest rate means the cost of investments and consumption would decrease or increase based on the changing interest rates.

So as the interest rates goes up, the business and consumer needs to pay higher financing costs on their loans which might led to lower demand resulting in decline in business and consumer spending and vice versa.

the above is the answer.