- Interest rates represent the cost of borrowing and the return on saving. - Lower interest rates make borrowing cheaper and saving less attractive. - Cheaper borrowing stimulates investment by businesses and consumption by households.
If the interest rate is decreased in an economy, it will
Asked in UPSC IAS 2014 · Topic: Money & Banking (Monetary Policy: Objectives, Instruments (quantitative and qualitative), and Transmission Mechanism)
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Answer: C. increase the investment expenditure in the eco‐ nomy
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