How did lower interest rates help economic growth?

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Expert Solution

Ans.)1.) The lower the interest rate, the more willing people are to borrow money to make big purchases such as houses or cars. When consumer pay less interest, this gives them more money to spend which can create a ripple effect of increased spending throughout the economy. This tends to encourage spending and investment which leads to higher aggregate demand (AD) and economic growth.

2.) It created opportunities to reduce personal and government debt.

3.) It allowed businesses to increase benefits and wages for employees.

4.) It helped people borrow money to use to purchase products and services.

5.) It forced the government to increase spending on federal and state projects.

This is how lower interest rates help in economic growth.

Rahul Sunny answered 2 years ago

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