A reduction in interest rates, causes an increases in the monetary base that results in an _________ in the availability of consumer credit and a ________ in the cost of consumer credit?
Correct answer: C. increase, reduction
- A. reduction, increase
- B. reduction, reduction
- C. increase, reduction
- D. increase , increase
Explanation
Lower interest rates make borrowing cheaper, so the availability and use of consumer credit generally increase while its cost decreases. Thus the sequence is increase in availability followed by reduction in cost.
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About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
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