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

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Q: 61 (IAS/2014)
If the interest rate is decreased in an economy, it will

question_subject: 

Economics

question_exam: 

IAS

stats: 

0,305,104,28,32,305,44

keywords: 

{'interest rate': [0, 0, 1, 2], 'economy': [1, 3, 8, 35], 'investment expenditure': [0, 0, 0, 2], 'total savings': [0, 0, 0, 2], 'consumption expenditure': [0, 0, 0, 1]}

If the interest rate is decreased in an economy, it will likely increase the investment expenditure in the economy. When interest rates decrease, borrowing money becomes cheaper, and businesses are more likely to borrow money to invest in their operations. This increased investment expenditure can lead to economic growth and job creation.

A decrease in interest rates may also lead to an increase in consumption expenditure, as individuals may be more likely to take out loans to buy goods and services, but the effect on consumption is less clear-cut than the effect on investment.

Lower interest rates may not have a direct impact on tax collection by the government, as tax collection is usually determined by factors such as the tax rate and tax compliance rather than interest rates.

Finally, lower interest rates may decrease total savings in the economy, as individuals and businesses may be less likely to save money when the returns on their savings are low.

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