Suppose that interest rates decrease. Holding everything else constant, determine what happens to aggregate demand and its components. If interest rates decrease, consumption . If interest rates decrease, investment . If interest rates decrease, government spending . If interest rates decrease, the value of net exports . Answer Bank does not change decreases increases Overall, aggregate demand
When interest rates decrease, It causes a ripple effect in the economy that stimulates growth and wealth creation. In the long run, it might cause inflation.
Explanation:
If interest rates decrease, consumption increases because there is more disposable income available in each household.
If interest rates decrease, investment increases since the cost of borrowing is cheaper.
If interest rates decrease, government spending decreases .
If interest rates decrease, the value of net exports increase because the economy us stimulated as a result of a business boom facilitated by low and affordable loans.
