Answer:
4. It reduces the cost of borrowing. This increases demand because consumers can spend more by using credit.
Step-by-step explanation:
When interest rates are lowered, it becomes cheaper for businesses and consumers to borrow money. This can lead to increased investment and spending, which can boost economic growth.
For businesses, lower interest rates can make it more affordable to finance new projects and expansions. This can lead to increased production and hiring, which can create jobs and boost economic activity.
For consumers, lower interest rates can make it more affordable to finance big-ticket items like cars and homes. This can lead to increased spending, which can also boost economic growth.
Of course, there are also some potential downsides to lowering interest rates. For example, lower interest rates can make it more difficult for savers to earn a return on their money. Additionally, lower interest rates can make it easier for people to take on too much debt, which can lead to financial problems in the future.
Overall, the impact of lowering interest rates on supply and demand is complex and depends on a variety of factors. However, in general, lower interest rates can lead to increased investment and spending, which can boost economic growth.