In October 2008,central banks around the world coordinated a decrease in interest rates. Ben Bernanke,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

Question

Quizplus · Accepted Answer

A decrease in interest rates would lead to lower borrowing costs, which would incentivize firms to invest more and households to consume more. This would increase consumption and investment expenditure components. However, exports would not increase as it is not directly affected by interest rate changes. Therefore, the correct answer is II and III only.

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