Defence Exam > Defence Questions > If the interest rate is decreased in an econo...
Start Learning for Free
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
Correct answer is option 'C'. Can you explain this answer?
| FREE This question is part of | Download PDF Attempt this Test |
Verified Answer
If the interest rate is decreased in an economy, it willa)Decrease the...
When interest rates decrease then investment expenditure by businesses on capital goods like factories and equipment increase in an economy.
Most Upvoted Answer
If the interest rate is decreased in an economy, it willa)Decrease the...
Impact of Decreased Interest Rate on Investment Expenditure
Decreasing the interest rate in an economy typically leads to an increase in investment expenditure. This is because lower interest rates reduce the cost of borrowing for businesses, making it cheaper for them to finance new projects and expansions. As a result, businesses are more likely to take out loans to invest in new equipment, technology, and infrastructure.
Reasons for Increase in Investment Expenditure
- Lower interest rates make it more attractive for businesses to borrow money for investment purposes.
- Businesses can take advantage of lower borrowing costs to fund projects that may have been too expensive with higher interest rates.
- Increased investment expenditure can lead to higher productivity, job creation, and overall economic growth.
Importance of Investment Expenditure for Economic Growth
Investment expenditure plays a crucial role in driving economic growth. By investing in new capital goods and technologies, businesses can increase their production capacity, improve efficiency, and create new job opportunities. This, in turn, can stimulate consumer spending, further boosting economic activity.
Overall Impact on the Economy
In conclusion, a decrease in interest rates can have a positive impact on investment expenditure in an economy. By lowering the cost of borrowing, businesses are encouraged to invest in new projects and expand their operations, leading to increased productivity and economic growth. It is essential for policymakers to carefully manage interest rates to support investment and overall economic development.
Decreasing the interest rate in an economy typically leads to an increase in investment expenditure. This is because lower interest rates reduce the cost of borrowing for businesses, making it cheaper for them to finance new projects and expansions. As a result, businesses are more likely to take out loans to invest in new equipment, technology, and infrastructure.
Reasons for Increase in Investment Expenditure
- Lower interest rates make it more attractive for businesses to borrow money for investment purposes.
- Businesses can take advantage of lower borrowing costs to fund projects that may have been too expensive with higher interest rates.
- Increased investment expenditure can lead to higher productivity, job creation, and overall economic growth.
Importance of Investment Expenditure for Economic Growth
Investment expenditure plays a crucial role in driving economic growth. By investing in new capital goods and technologies, businesses can increase their production capacity, improve efficiency, and create new job opportunities. This, in turn, can stimulate consumer spending, further boosting economic activity.
Overall Impact on the Economy
In conclusion, a decrease in interest rates can have a positive impact on investment expenditure in an economy. By lowering the cost of borrowing, businesses are encouraged to invest in new projects and expand their operations, leading to increased productivity and economic growth. It is essential for policymakers to carefully manage interest rates to support investment and overall economic development.
|
Explore Courses for Defence exam
|
|
Similar Defence Doubts
If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer?
Question Description
If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? for Defence 2024 is part of Defence preparation. The Question and answers have been prepared according to the Defence exam syllabus. Information about If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Defence 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer?.
If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? for Defence 2024 is part of Defence preparation. The Question and answers have been prepared according to the Defence exam syllabus. Information about If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? covers all topics & solutions for Defence 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer?.
Solutions for If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? in English & in Hindi are available as part of our courses for Defence.
Download more important topics, notes, lectures and mock test series for Defence Exam by signing up for free.
Here you can find the meaning of If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer?, a detailed solution for If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? has been provided alongside types of If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice If the interest rate is decreased in an economy, it willa)Decrease the consumption expenditure in the economyb)Increase the tax collection of the Governmentc)Increase the investment expenditure in the economyd)Increase the total savings in the economyCorrect answer is option 'C'. Can you explain this answer? tests, examples and also practice Defence tests.
|
|
Explore Courses for Defence exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup