Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Decreased aggregate demand
B
Increased consumption
C
Higher unemployment
D
Increased taxes
Understanding the Answer
Let's break down why this is correct
Answer
Lower interest rates make it cheaper for people and businesses to borrow money. When borrowing becomes easier, more individuals may take out loans to buy homes or start new businesses, leading to increased spending in the economy. Similarly, when the government expands its spending, it injects more money into the economy, which encourages businesses to invest and hire more workers. This increased government spending can lead to greater demand for goods and services, just like lower interest rates lead to more borrowing. For example, if the government builds a new road, construction workers get jobs, and they spend their earnings on groceries and other necessities, stimulating economic growth.
Detailed Explanation
When the government spends more money, it puts cash into the economy. Other options are incorrect because Some might think that more government spending would lead to less demand; It's a common mistake to think that spending less leads to more jobs.
Key Concepts
Monetary policy effects
Fiscal policy effects
Aggregate demand dynamics
Topic
Effects of Lower Interest Rates
Difficulty
easy level question
Cognitive Level
understand
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