Question

Reducing interest rates encourages consumers to _____.

spend less money \
buy fewer big-ticket items
borrow more money

Answer 1

Borrow more money would be the most fitting. When you think about what interest rates are it is the cost of borrowing an amount of money until it can be repaid.

Answer 2

The correct answer is:

Borrow more money

Explanation:

Interest rates are the cost the borrower has to pay to the lender, it is usually charged as a monthly or annual percentage in the payments to pay the total amount of the loan, so when the interest rates are reduced, it is cheaper to the borrow money. Interest rates can be seen as the price to pay for the amount borrowed, but also as the price a bank pays when people save money.