ECONOMICS (CBSE/UGC NET)

ECONOMICS

MONETARY POLICY

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Business will invest more if
A
Interest rate on loan is low
B
Expected return on investment is low
C
Interest rate on loan is high
D
None of the above
Explanation: 

Detailed explanation-1: -Lower interest rates make big-ticket items cheaper for both businesses and consumers. Businesses take advantage of lower rates to invest in expansion. Consumers borrow more and buy more, justifying more business expansion.

Detailed explanation-2: -A decrease in interest rates by the Federal Reserve has the opposite effect of a rate hike. Investors and economists alike view lower interest rates as catalysts for growth-a benefit to personal and corporate borrowing. This, in turn, leads to greater profits and a robust economy.

Detailed explanation-3: -In summary, when interest rates are lowered: Bond prices rise. Potential stock market gains. Lower interest rates on savings accounts and CDs.

Detailed explanation-4: -With an increase in interest rates, businesses with company credit cards and existing loans can have higher interest payments, less disposable income and bigger overheads. In some cases, borrowers may find themselves paying off the interest only, rather than the loan itself.

There is 1 question to complete.