Multiple Select QuestionSelect all that applyA lower equilibrium interest rate results in which of the following?Multiple select question.An increase in business borrowing for investmentA decrease in business borrowing for investmentA decrease in total spending in the economyAn increase in total spending in the economy
Question
Multiple Select QuestionSelect all that applyA lower equilibrium interest rate results in which of the following?Multiple select question.An increase in business borrowing for investmentA decrease in business borrowing for investmentA decrease in total spending in the economyAn increase in total spending in the economy
Solution
A lower equilibrium interest rate can result in:
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An increase in business borrowing for investment: Lower interest rates make borrowing cheaper. This can encourage businesses to take out loans to fund investments, leading to an increase in business borrowing for investment.
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An increase in total spending in the economy: Lower interest rates can stimulate spending in the economy. This is because consumers and businesses are more likely to borrow and spend money when interest rates are low, leading to an increase in total spending in the economy.
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