When interest rate rises,how might business and consumers change their economic behavior? Hopefully,you will give me better answer as soon as possible!


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martin white answered
Currently business are being encouraged to invest for example in the UK capital allowances are available at a favourable rate until next year when the government budget changes how things stand, this will mean that businesses will be less likely to invest in their growth as they won't get the tax relief they once were, one of the things that could change this is the availability of loans and finance available to companies which appears to be low at the moment, but this would depend on low interest rates for a while, enough to make it profitable for a bank to lend and low enough for the company to feel it is worthwhile.  As rates go up it may put pressure on companies to increase prices to cover costs of loan repayments which would be passed onto the consumer and depending on how the unemployment rate is this may make people reluctant to spend especially after a period like christmas where energy costs and the costs of christmas has already put added pressure on the consumer.

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