Question by  samwizzle (1)

Do lower interest rates stimulate a lagging economy?

It seems like it would help during a recession.


Answer by  tamarawilhite (17883)

That helps if: 1. it stimulates borrowing for long term investments, like building new factories OR 2. Helps refinance existing debt to a lower rate, freeing up cash to spend.


Answer by  wrusche (176)

Lowering interest rates can help by allowing businesses to expand with a lower financing cost and allow consumers to increase purchases. Expanding businesses would then be able to increase hiring and purchases. However, if they are uncertain about the future, they may not spend more even with low interest rates.

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