Question
If the interest rate is decreased in an economy, it will
(a) decrease the consumption expenditure in the economy
(b) increase the tax collection of the Government
(c) increase the investment expenditure in the economy
(d) increase the total savings in the economy
Answer:
C
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Explanation:
A decrease in the interest rate makes borrowing cheaper, which incentivizes businesses and individuals to take loans for investment purposes. Lower interest rates reduce the cost of capital, making it more attractive for businesses to undertake investment projects. This, in turn, leads to an increase in investment expenditure in the economy.