As interest rates rise (LO4) a) more borrowing will be undertaken b) less borrowing will be undertaken c) there is no change in the level of borrowing

Interest rates represent the cost of borrowing money. When interest rates rise, the cost of borrowing increases as well. This means that people and businesses have to pay more interest on the money that they borrow from banks and other financial institutions. Generally speaking, when the cost of borrowing rises, people tend to borrow less because it becomes more expensive. Now, let's analyze the statements one-by-one: a) "More borrowing will be undertaken" This statement suggests that when interest rates rise, people and businesses will borrow more. However, this is contrary to the general perception of how interest rates affect borrowing, as borrowing becomes more expensive. b) "Less borrowing will be undertaken" This statement is in line with the general perception. When interest rates rise, the cost of borrowing increases, and people and businesses are more likely to reduce their borrowing in response to higher costs. c) "There is no change in the level of borrowing" This statement suggests that interest rates have no effect on borrowing levels. In real scenarios, interest rates are one of the key factors influencing borrowing decisions.

Based on our understanding of the relationship between interest rates and borrowing, the correct answer is (b) "Less borrowing will be undertaken." When interest rates rise, the cost of borrowing becomes more expensive, and people and businesses are generally more likely to reduce their borrowing in response.