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.

Question

Quizplus · Accepted Answer

Lowering the interest rate will make it cheaper for firms to borrow money, which will encourage them to increase investment projects. However, it might discourage spending on consumer durables as people may end up saving money in response to lower interest rates. It might also lead to a decrease in the value of the dollar, which would lower net exports. However, it is not certain that it would decrease spending on new homes as the lower interest rates might make buying a home more affordable for some people.

Lowering the Interest Rate Will