ECONOMICS
MONEY
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Savers to save more
|
|
|
Borrowers to borrow more
|
|
|
Either A or B
|
|
|
None of the above
|
Detailed explanation-1: -Conventional logic suggests that lowering the policy interest rate will stimulate consumption and investment while discouraging people from saving, but low interest rates may also prompt people to increase their saving to compensate for the low rate of return.
Detailed explanation-2: -Spend or Save? An increase in interest rates may lead consumers to increase savings since they can receive higher rates of return. This is outlined in the marginal propensity to save.
Detailed explanation-3: -When interest rates decline, savings account rates also drop. When interest rates rise, savings account rates are bid up. Generally speaking, central banks and governments support low-interest rate environments. This artificially pushes down the rates earned everywhere else in the economy.
Detailed explanation-4: -With higher interest rates taking hold, consumers should expect to pay more for car loans, credit card debt, and mortgages in the months ahead, but those who have an emergency fund set aside may also earn more at the bank.
Detailed explanation-5: -Higher returns for savers. If you’re a saver, low interest rates have brought about the financial equivalent of a long drought. Tamed inflation. More lending. More interest income for retirees. Stronger dollar to boost purchasing power. Bottom line. 25-Jan-2023