If the interest rate is decreased in an economy, it will

2014

Economics, RBIXLiquidity Management

If the interest rate is decreased in an economy, it will

(a)

decrease the consumption expenditure in the economy.

(b)

increase the tax collection of the Government.

(c)

Increase the investment expenditure in the economy.

(d)

increase the total savings in the economy.

Explanation

Decreased interest rates would ensure availabilty of capital for investment expenditure.Tikdam: That’s why coroprate keep clamouring for repo cut. Money will be cheaper to borrow and investment and consumption would increase. Savings would reduce as banks will pay lesser interest