In October 2008, central banks around the world coordinated a decrease in interest rates. Ben Bernanke, then Chairman of the Federal Reserve, stated that "policy makers will remain in close contact, monitor developments closely and stand ready to take additional steps should conditions warrant." If all the banks enacted the policy simultaneously, which of the following expenditure components would increase in the United States?
I. exports
II. consumption
III. investment
A) I, II and III
B) II and III only
C) II only
D) I and III only

Question

Quizplus · Accepted Answer

Decreasing interest rates typically makes borrowing cheaper, which can stimulate consumption and investment by making loans more affordable for consumers and businesses. However, the impact on exports is not directly influenced by domestic interest rate decisions in the manner described; exports are more directly affected by factors like exchange rates and foreign demand.

In October 2008, Central Banks Around the World Coordinated a Decrease