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

Economic Affairs Money Supply and Monetary Policy

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

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UPSC CSP Previous Year Paper (2014)

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decrease the consumption expenditure in the economy

increase the tax collection of the Government.

Increase the investment expenditure in the economy

increase the total savings in the economy.

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Explanation:

Change in interest rates affect the public's demand for goods and services and, thus, aggregate investment spending. A decrease in interest rates lowers the cost of borrowing, which encourages businesses to increase investment spending. Lower interest rates also give banks more incentive to lend to businesses and households, allowing them to spend more.