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According to the IS-LM model, what happens when the interest rate decreases?
  • a)
    Investment demand decreases.
  • b)
    Investment demand increases.
  • c)
    Consumption demand decreases.
  • d)
    Consumption demand increases.
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
According to the IS-LM model, what happens when the interest rate decr...
In the IS-LM model, a decrease in the interest rate leads to an increase in investment demand. This is because lower interest rates make investment projects more profitable, prompting businesses to undertake more investment.
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According to the IS-LM model, what happens when the interest rate decreases?a)Investment demand decreases.b)Investment demand increases.c)Consumption demand decreases.d)Consumption demand increases.Correct answer is option 'B'. Can you explain this answer?
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