📚 Learning Guide
Interest Rates and Economic Impact
medium

Interest rates are to investment spending as government spending is to what economic factor?

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Learning Path
Learning Path

Question & Answer
1
Understand Question
2
Review Options
3
Learn Explanation
4
Explore Topic

Choose the Best Answer

A

Aggregate demand

B

Inflation rates

C

Tax revenue

D

Unemployment rates

Understanding the Answer

Let's break down why this is correct

Answer

Interest rates can influence investment spending because they determine the cost of borrowing money. When interest rates are low, businesses and individuals are more likely to borrow and invest in new projects or purchases, which helps the economy grow. Similarly, government spending impacts another important economic factor: overall demand in the economy. When the government spends money on projects like building roads or schools, it creates jobs and increases the demand for goods and services. For example, if the government invests in a new highway, construction workers get paid, and they will spend that money on things like food or clothing, boosting the economy further.

Detailed Explanation

When the government spends money, it helps increase overall demand for goods and services. Other options are incorrect because Some might think government spending directly causes prices to rise; It's easy to confuse spending with revenue.

Key Concepts

Interest Rates
Investment Spending
Aggregate Demand
Topic

Interest Rates and Economic Impact

Difficulty

medium level question

Cognitive Level

understand

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