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During a recession, what must happen to interest rates to spur economic growth? A) drop B) increase C) remain stable D) increase and decrease

Caroline Campbell

in Social studies

1 answer

1 answer

Ramon Kelly on September 27, 2018

The correct answer is D. A recession is a period in which the production and demand has stagnated. This also negatively affects employment levels. An expansive monetary policy can be implemented in order to boost this economy by contributing to the improvement of the demand and production levels. Such a policy can be done through the reduction of interest rates, so that funding becomes more affordable and, as a consequence, increasing levels of investment and production. More projects are initiated, which require hand work to carry out, so unemployment levels decrease. These former workers unemployed, start earning a salary and the demand for goods and services.Therefore, a policy can boost demand, investment, production and employment and at the end of the period of recession.

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