urage saving, since the opportunity cost of spending has increased. This again will reduce the consumption element of aggregate demand.
             Higher interest rates will also cause a rise in mortgage interest payments for people on variable-rate mortgages (the same is true for those on fixed-rate mortgages, although there will be a time lag before their rates change). Homeowners will therefore have a reduced real effective disposable income, thus reducing consumption. Increased mortgage costs will also reduce market demand in the housing market. For example, the series of increases in interest rates from
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