QUESTION

Medium

Economy

Prelims 2014

If the interest rate is decreased in an economy, it will

Select an option to attempt

Explanation

Lower Interest rates encourage additional investment spending , which gives the economy a boost in times of slow economic growth.

Changes in interest rates affect the public's demand for goods and services and, thus, aggregate investment spending.

A decrease in interest rates lowers the cost of borrowing, which encourages businesses to increase investment spending. Lower interest rates also give banks more incentive to lend to businesses and households, allowing them to spend more.

Trusted by 2L aspirants

Practice UPSC Prelims PYQs Smarter

Practice Now
  • Track accuracy & weak areas
  • See past trends & repeated themes
Start Practicing Now

Crack UPSC with your
Personal AI Mentor

An AI-powered ecosystem to learn, practice, and evaluate with discipline

SuperKalam is your personal mentor for UPSC preparation, guiding you at every step of the exam journey.

Download the App

Follow us

ⓒ Snapstack Technologies Private Limited