Question

Do the advantages outweigh the disadvantages for the low-interest rat? Please explain Explain.

Answer 1

Advantages of lower interest rate outweight the disadvantages or not only can explained when we have to analyse advantages of lower interest rate and disadvantages of lower interest rate.

Advantages of Lower Interest Rate

Following are the advantages of lower interest rate-

a.Business can earn money easily to expand their business-Low interest rates provide money cheaply to organisation which they can use for paying their creditor ,paying employee,paying dividend,purchasing equipment etc.

b.Low interest rate make mortage payment lower-Due to lower interest rate buyer can purchase home at lower rate.

c.Benefit for consumer-consumer can finance car,jwellery,loan for study at lower interest rate.

Disadvantages of Lower Interest Rate

Following are the disadvantages of lower interest rate-

a.Less income on savings-when lower interest rate savers earn less income,so its reduce saving habit of people.

b.Negative effect on banks -lower interest rate affect badly on earning of banks.

c.Negative effect on insurrance company-Insurrance company also earn less when lower interest rate.

So from the above discussion it is clear that lower interest rate help organisation to borrow fund easily to expand their business,advantage to puchase home at lower rate and consumer can finance car or other things at lower rate but on the other side its effect on the income of saver,bank and insurrance company.When considering all aspect advantages are more than disadvantages.