When monetary policy reduces interest rates,

Question

Quizplus · Accepted Answer

When monetary policy reduces interest rates, it becomes cheaper to borrow money. This means that borrowers, who often include businesses and individuals, will benefit from lower interest rates as their borrowing costs decrease. On the other hand, lenders, such as banks and other financial institutions, will receive less income from interest payments. Therefore, income is redistributed from lenders to borrowers. The impact on the construction industry can vary depending on factors such as the state of the economy, availability of credit, and demand for housing. However, in general, lower interest rates can stimulate demand for housing and lead to an increase in construction activity rather than negatively impacting the industry. The income for retired people may increase if they hold fixed-income investments such as bonds or certificates of deposit, but this is not a guaranteed outcome and depends on the specific investments they hold.

When Monetary Policy Reduces Interest Rates