By lowering interest rates, it becomes cheaper to borrow money
and less profitable to save, which encourages individuals and
businesses to spend. Now, since rates are lowered, savings are
denied, more money is borrowed and spent. As borrowing increases,
the total money supply increases in the economy. Reducing interest
rates therefore ultimately results in reduced savings, increased
money supply and better spending, which translates into higher
overall economic activity, which is a good thing. The bad side is
the decline...