What is the relationship between lower interest rates and aggregate expenditure?
A)Lower interest rates raise consumption and investment but lower government purchases and net exports, and thus they have an indeterminate effect on aggregate expenditure.
B)Lower interest rates boost aggregate expenditure.
C)Aggregate expenditure is not affected by changes in real interest rates.
D)Lower interest rates cause aggregate expenditure to fall.

Question

Quizplus · Accepted Answer

Lower interest rates incentivize consumption and investment as the cost of borrowing decreases, which leads to an increase in aggregate expenditure.

What Is the Relationship Between Lower Interest Rates and Aggregate