How Does an Interest Rate Increase Impact Borrowing? | Economics Explained

The correct answer is 'cause borrowers to borrow less.'

When the interest rate increases, it becomes more expensive for borrowers to borrow money. This increase in borrowing costs discourages borrowing and leads to a decrease in borrowing activity. As a result, borrowers will borrow less.

The other options mentioned in the question are not necessarily true. An increase in the interest rate does not necessarily cause lenders to save more, reduce everyone's current consumption, or make everyone worse off. These outcomes depend on various factors and individual preferences.