Question

What is the impact low interest rates will have on demand for office space?

Please write 400 words. No plagiarism please. I need the answer within 1- 1.30 hours

Thank you

Answer 1

Answer) Low interest rates in the economy would incentives the buyer of the office space to demand more of it. Because most of the spending is supported by borrowing from banks and other financial institutions. If the rate of interest is very low, then the consumer would borrow the desired sum. That could be further used to make an investment for capital good or real estate just like office space.

According to Keynesian equation:

Y= C+I+G+X-M

I= Io- bi

The fall in the interest rate would lead to a rise in the investment. The rise in the investment would result in the surge of aggregate output in the economy. A fall in the interest rate could trigger a virteous cycle of saving, investment, and output.

As a fall in the interest rate would discourage saving in the demand deposit. Also leading to a rise in the demand for credit. The demand for office space would rise due to a interest rate cut.