Question

Lower interest rates can be attractive for consumers and businesses. But when the federal government lowers interest rates, the amount of loans granted increases, making it more difficult to obtain a loan. So, in some cases, this can be bad ... for the most part, it is good to a lot to be able to have a credit card or a home loan with a low interest rate. The lower the interest rate, the more you can repay the loan principle.
What do you think?

Answer 1

Ans - Generally when the federal government or any central bank of the country decreases the interest rates aim is to increase the money supply in the market. when the interest rates are decreased generally there seems to have a positive impact on the economy. consumers tend to now spend more on the good and services because of the availability of goods and service are cheap due to low interest rates. People will buy the mortgage loan, car loan, increase in the use of credit cards because of the low interest rates.

when the interest rates are low it generally good for the business because now the firms or company can buy loans from banks at low costs. Lower interest rates make borrowing costs cheaper that's why it encourages firms and individuals for greater spending and investment by taking the loan.

On the flip side, it can have a slight disadvantage due to lower interest rates individuals and firms will start taking loans from banks which in turn increases the risks of bad debts on banks if the loan amount is not recovered from the consumers. Also due to large loan applicants, it can be difficult to obtain loan some times. The demand in the market increases due to lower rates and people is willing to buy goods and service which in turn can give rise to inflation also. Consumers spend more and save less because they get less return due to the low interest rates. But overall lower rates generally have a positive impact on the economy.