In the times of difficulties in an economy, the central bank decreased interest rates in the country. What is the motive behind this move?
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: Increase the demand for money
Lowering interest rates makes borrowing cheaper and encourages spending and investment by businesses and consumers. As borrowing costs decrease, individuals and businesses are more likely to take out loans and spend or invest the money, which can help stimulate economic activity. This increased spending and investment typically leads to a higher demand for money.