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As interest rates rise, investors may be less willing to borrow money to finance their investments. This could decrease investment activity as investors become more cautious about taking on debt.
Interest rates are the cost of borrowing money, and various factors determine them such as the level of economic activity, inflation, and the supply and demand of money. In the past, interest rates have fluctuated widely, with periods of high interest rates followed by periods of low interest rates.
For example, in the early 1980s, interest rates reached as high as 20 percent as the Federal Reserve attempted to curb inflation. However, in recent years, interest rates have been at historically low levels, with the Federal Reserve setting its benchmark interest rate near 0 percent in response to the financial crisis of 2008.