UPSC CSE Prelims
Question 56
If the interest rate is decreased in an economy, it will
View correct answer and explanation
Correct answer: C
Correct Option: C
Explanation: Lower interest rates reduce the cost of borrowing and generally encourage firms to undertake additional investment projects, other things equal.
Option-wise Analysis:
A: Incorrect - Cheaper credit generally tends to stimulate, not reduce, consumption.
B: Incorrect - Tax revenue need not rise automatically following a rate cut.
C: Correct - Correct: cheaper loans tend to increase business investment spending.
D: Incorrect - Lower interest rates tend to discourage interest-sensitive savings rather than raise them.