Lower interest rates tend to reduce the proportion of income people save, and increase the amount they consume or invest.

Question

Quizplus · Accepted Answer

Lower interest rates make saving less attractive because people earn less on their savings. As a result, they tend to spend more or invest in riskier assets to generate higher returns. This can lead to an increase in consumption and investment, which can stimulate economic growth.

Lower Interest Rates Tend to Reduce the Proportion of Income