Managers at Sandburg Real Estate are surprised to hear that interest rates are likely to remain low for the next six months. Which of the following is an implication of low interest rates?

Question

Quizplus · Accepted Answer

Low interest rates have a direct bearing on consumer demand. When credit is cheap (because interest rates are low), consumers buy homes, automobiles, computers, and even vacations on credit; in turn, all of this demand fuels economic growth. During periods of low interest rates, firms can easily borrow money to finance future growth. Borrowing at lower rates lowers the cost of capital and enhances a firm's competitiveness.

Managers at Sandburg Real Estate Are Surprised to Hear That