Multiple Choice Questions on If the interest rate is decreased in an economy it will ........ for CDS Exam Preparation

Money and banking

Indian Economy (CDS)

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Indian Economy - Understanding the basics of Indian economic system

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    If the interest rate is decreased in an economy, it will

    decrease the consumption expenditure in the economy

    Incorrect Answer

    increase the tax collection of the Government

    Incorrect Answer

    increase the investment expenditure in the economy

    Correct Answer

    increase the total savings in the economy

    Incorrect Answer
    Explanation:

    If interst rate in an Economy is decresed then it will unlock more funds in an economy as funds will be available at a cheaper rate of interst. This will increase the investment expenditure in economy as more capital is available.

    Money borrowed on interst is not kept as saving as it will decrease the value of money in real sense.

    Increase in tax collection also has no direct and immediate linkage with decrease in intert rate. It can be true over a longer period of time.

    Consumption will definitely increase in economy as increased investment expenditure requires consumtion

    So, correct option is Option 3 i.e.increase the investment expenditure in the economy


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