If the Bangko Sentral ng Pilipinas increases interest rates, which of the following is likely to happen?
A. Borrowing becomes cheaper.
B. Consumers spend more on credit.
C. The inflation rate rises.
D. Borrowing and spending decrease.
Answer (1)
The correct answer is D. When interest rates go up, it becomes more expensive to borrow money. People are less likely to use credit cards or take out loans, and businesses may delay expansion plans. This reduces demand, which helps to lower inflation. In 2023, the BSP raised its rates to prevent excessive price increases in housing, food, and transport sectors.
