Lowering the interest rate will
A)decrease spending on consumer durables.
B)increase investment projects by firms.
C)decrease spending on new homes.
D)decrease the value of the dollar and lower net exports.
E)increase government spending.

Question

Quizplus · Accepted Answer

Lowering the interest rate will make it cheaper for firms to borrow money, which will increase their incentive to invest in new projects. A lower interest rate will also encourage consumers to spend more on products and services, including consumer durables and new homes. However, it is not likely to increase government spending or lower the value of the dollar and net exports.

Lowering the Interest Rate Will