Answer:
c. planned investment spending is most likely to decrease.
Explanation:
High interests rates reduce the levels of investment in an economy. Â Investments are capital intensive ventures and will require borrowing to finance them. When interest rates are high, loans become expensive. For a project to be viable in times of high-interest rates, it will need to have a very high rate of return.
When interest rates are high, banks will offer a higher rate of return on savings. Using savings to finance investments become more costly. Investors would prefer to put their money in a deposit account for higher interest payments than to invest.
High-interest rate thus slows down investments expenditures. Â The cost of borrowing goes up while the incentives to save increase.
