Question:
Discuss the likely consequence on money supply if the rate-setting panel had decreased the said rate.
Discuss the likely consequence on money supply if the rate-setting panel had decreased the said rate.
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Lower interest rates increase money supply and stimulate economic activity but can lead to inflationary pressures.
Updated On: Jan 30, 2025
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Solution and Explanation
Cheaper Loans: Lower interest rates encourage borrowing by businesses and households.
Increased Liquidity: More borrowing increases liquidity, boosting consumption and investment.
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