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MrBio23 MrBio23
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The central bank of Baltonia decided to lower the interest rate that commercial banks use to make loans to one another when the growth rate of Baltonia's output fell. What will be the effect of this policy on Baltonia's economy?
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Macroeconomics

Macroeconomics


Edition: 3rd
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catdastercatdaster
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If the central bank of Baltonia decides to lower the interest rate that banks use to make loans to one another, the banks will make more loans. If the banks make more loans, the availability of credit will increase and the interest rate will fall. This will lead to an increase in investment. As a result, output and employment will increase.
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