Which of the following is an example of economic instability?

A sharp rise in interest rates is an example of economic instability because it can create significant fluctuations in the economy. Higher interest rates typically lead to increased borrowing costs for consumers and businesses, which can result in reduced spending and investment. This can slow economic growth, potentially leading to higher unemployment rates and decreased consumer confidence. Conversely, sharp increases in interest rates may also lead to volatility in financial markets, affecting everything from loan approvals to stock market performance.

In contrast, reductions in government spending can be a fiscal policy tool aimed at stabilizing the economy but are not inherently indicative of instability. A stable currency valuation suggests economic stability because it implies consistent purchasing power and confidence in that currency. Increases in job security are also signs of economic health, as they indicate a stable employment environment where workers feel safe in their jobs, which in turn supports consumer spending and economic growth.