Why does lowering interest rates help the economy?

Question

Why does lowering interest rates help the economy?

(1 point)
A. • All actions by the Fed help the economy.
B. • Low rates are not usually followed by raising rates.
C. • More people borrow when rates are low, so more money is spent.
D. • Interest rates are similar to exchange rates for international currency.

Answer 1

C. More people borrow when rates are low, so more money is spent. Lowering interest rates makes it cheaper for individuals and businesses to borrow money, which typically results in increased spending on goods and services. This increased economic activity can help stimulate growth and lift the overall health of the economy.