If the interest rate is decreased in an economy, it will

1. decrease the consumption expenditure in the economy
2. increase the tax collection of the Government
3. increase the investment expenditure in the economy
4. increase the total savings in the economy

Explanation

Option (c) is correct

• When the interest rate is decreased, borrowing becomes cheaper for businesses and individuals. This generally leads to an increase in investment expenditure because businesses are more likely to take loans for expansion, and consumers may also borrow more for large purchases like homes or cars.
• Lower interest rates stimulate economic activity, particularly in sectors dependent on credit, thus promoting investment.

Answer: (c) increase the investment expenditure in the economy; Difficulty Level: Easy