QuestionJuly 14, 2025

A decrease in the interest rate will increase consumption spending. True False

A decrease in the interest rate will increase consumption spending. True False
A decrease in the interest rate will increase consumption spending.
True
False

Solution
4.6(269 votes)

Answer

True Explanation 1. Understand the relationship between interest rates and consumption Lower interest rates reduce the cost of borrowing, making loans cheaper. This encourages consumers to borrow and spend more. 2. Determine the effect on consumption spending As borrowing becomes cheaper, consumers are likely to increase their consumption spending due to increased access to credit.

Explanation

1. Understand the relationship between interest rates and consumption<br /> Lower interest rates reduce the cost of borrowing, making loans cheaper. This encourages consumers to borrow and spend more.<br /><br />2. Determine the effect on consumption spending<br /> As borrowing becomes cheaper, consumers are likely to increase their consumption spending due to increased access to credit.
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