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Interest Rates and Poverty Reduction

Question

Analyse how a cut in the rate of interest could reduce poverty.

Category:

Macroeconomic Factors and Policies

Frequently asked question

Preview Answer

I. 🍃Introduction
- Definition of interest rate
- Importance of interest rate in the economy

II. Lower interest rate and its impact on the poor
- Increased purchasing power of the poor who have borrowed before
- Easier and cheaper borrowing
- Ability to buy more necessities
- Ability to spend on education
- Improved job opportunities and higher pay

III. Lower interest rate and its impact on consumer expenditure
- Encourages a rise in consumer expenditure
- Firms expand due to increased demand
- Cheaper finance for expansion
- Increased output and employment

IV. Higher output and spending and its impact on tax revenue
- Increased tax revenue due to higher output and spending
- Government can increase spending to reduce poverty

V. 👉Conclusion
- Summary of the impact of lower interest rates on poverty reduction
- Importance of government policies in reducing poverty through interest rate adjustments.

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