Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Lower interest rates decrease consumer spending, leading to slower economic growth.
B
Lower interest rates encourage consumer spending, which stimulates economic growth.
C
Lower interest rates have no significant effect on consumer spending or economic growth.
D
Lower interest rates reduce consumer spending but still promote economic growth.
Understanding the Answer
Let's break down why this is correct
Answer
Lower interest rates make borrowing money cheaper for consumers and businesses. When people can take out loans at lower costs, they are more likely to buy big-ticket items like cars or homes. For example, if a family can get a mortgage with a lower interest rate, they might decide to buy a new house instead of waiting. This increase in spending helps businesses grow because they sell more products and may need to hire more workers. Overall, as more money circulates in the economy, it can lead to economic growth.
Detailed Explanation
When interest rates are lower, borrowing money becomes cheaper. Other options are incorrect because Some might think lower rates mean less spending; It's a common belief that lower rates don't change spending.
Key Concepts
consumer spending
economic growth
Topic
Effects of Lower Interest Rates
Difficulty
medium level question
Cognitive Level
understand
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