interest rate effect

Definition

The impact of a rise in the cost of borrowing on production costs due to price inflation within an economy. The interest rate effect reflects the fact that most consumers and business finance managers will cut back on their borrowing activities when interest rates increase.

Use this term in a sentence

  • The interest rate effect could be responsible for explaining the disparity in the pricing as the only variable has been interest rates recently.

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  • You should know how the interest rate effect may change the state of the economy and have a plan to deal with it.

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  • We were worried about the interest rate effect and how it would raise over time and make things more than they were.

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