When the interest rate in the U.S. decreases as a result of expansionary monetary policy, investment spending _____ and consumption _____ .

Question

Quizplus · Accepted Answer

When interest rates decrease as a result of expansionary monetary policy, it becomes cheaper to borrow money, which incentivizes firms to increase investment spending. Also, lower interest rates decrease the cost of borrowing, which encourages consumers to spend more, leading to an increase in consumption. Therefore, investment spending increases, and consumption also increases.

When the Interest Rate in the U