ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Does Raising Interest Rates Increase Unemployment? It can have that effect. By raising the bar for investment, higher interest rates may discourage the hiring associated with business expansion. They also cap employment by restraining growth in consumption.

Detailed explanation-2: -Higher interest rates make it more expensive for people to borrow money and encourage people to save. Overall, that means people will tend to spend less. If people spend less on goods and services overall, the prices of those things tend to rise more slowly. Slower price rises mean a lower rate of inflation.

Detailed explanation-3: -The rise in interest rate increases the cost of investment, and investment falls in the economy. It leads to a fall in income and employment, which reduces consumption done by the consumers in the economy.

Detailed explanation-4: -Higher interest rates work to counter inflation partly by weighing on the labor market. As businesses face steeper borrowing costs, they grow less and cut back on hiring. As job opportunities dwindle, competition for workers eases and wage growth slows-reining in consumer spending.