Question

Which statement best describes the effects of low and high interest rates on the economy?

Answer 1

Low interest rates encourage consumers to borrow and spend, while high interest rates discourage such behavior.

Answer 2

I believe the answer is: Low interest rates encourage consumers to borrow and spend, while high interest rates encourage saving.

Which is why banks tend to give low interest rates when the economy is doing well, in order to promote growth to all available economic sectors. High interest rates on the other hand, tend to be implemented during inflation. When people are encouraged to save, the amount of money circulated in the market would be reduced, and the values of the currency would go up.