When interest rate fall what is its impact on the economy?
Answer:
It can actually hurt the economy.
Let me put it in layman words. Banks have to rotate the money. If the interest rates are down, then more people will withdraw money which will result in lack of funds. So, the Govt has to observe the trend and adjust accordingly.
more homes are bought
When interest rate goes down, more ppl'll borrow $$ fr. the bank, also ppl'll not keep so much $$ there, then there will be more $$ in the market (i.e. monetary supply increase) , in result lead to inflation.
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