Which of the following is an effect of a decrease in the interest rate?
A) it induces firms to invest less
B) it induces households to increase consumption
C) people put more money in their savings accounts
D) it leads to the appreciation of the exchange rate

Question

Quizplus · Accepted Answer

A decrease in the interest rate would lead to lower borrowing costs, which would encourage households to increase their spending on consumption goods and services. This is because they can borrow more money at a lower cost, leading to an increase in consumer spending. The other options are incorrect as a decrease in interest rates would lead to firms investing more, people putting less money in their savings accounts, and a depreciation of the exchange rate (not an appreciation).

Which of the Following Is an Effect of a Decrease