Effect of Lower Interest Rates - Key Concept

An expansion in money supply reduces interest rates. Lower real interest rates make investment and consumption cheaper. At lower interest rates, entrepreneurs undertake some investment projects they otherwise would not have. Spending, by firms, increases. Similarly, consumers buy more.

Transcript:

Effect of Lower Interest Rates - Key Concept

An expansion in money supply reduces interest rates. Lower real interest rates make investment and consumption cheaper. At lower interest rates, entrepreneurs undertake some investment projects they otherwise would not have. Spending, by firms, increases. Similarly, consumers buy more.

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