A lower equilibrium interest rate
A) increases saving, reduces total spending, and increases total output.
B) decreases saving, increases total spending, and decreases total output.
C) increases investment, increases total spending, and increases total output.
D) decreases investment, decreases total spending, and increases total output.

Question

Quizplus · Accepted Answer

A lower equilibrium interest rate reduces the cost of borrowing, encouraging more investment. This increase in investment leads to higher total spending and subsequently increases total output.

A Lower Equilibrium Interest Rate