Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It decreases consumer spending
B
It has no effect on consumer spending
C
It increases consumer spending
D
It makes consumer spending unpredictable
Understanding the Answer
Let's break down why this is correct
Answer
When interest rates decrease, borrowing money becomes cheaper for consumers. This means that loans for things like homes, cars, or personal expenses cost less in interest, making it easier for people to buy these items. With lower loan payments, consumers might feel more confident about spending money, which can lead to increased purchases. For example, if someone is considering buying a new car and the interest rate on their loan drops, they may decide to go ahead with the purchase because it will save them money each month. Overall, lower interest rates encourage consumers to spend more, which can help boost the economy.
Detailed Explanation
When interest rates go down, borrowing money becomes cheaper. Other options are incorrect because Some might think lower rates mean people spend less; It's a common belief that interest rates don't change spending habits.
Key Concepts
monetary policy
Topic
Interest Rates and Economic Impact
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.