Question

The interest rate will increase as a result of:

Select one:
a. decrease in minimum lending rate
b. a reduction in income
c. an open market purchase of bonds by the central bank
d. Increase in tax rate

= decrease in minimum lending rate​

Answer 1

The interest rate will increase as a result of decrease in minimum lending rate.

What will lead to an increase in the interest rate?

Interest rate can be described as the cost of borrowing. It is the rate that borrowers charge lenders for the use of their funds.

When the demand for money increases, the interest rate will increase. When there is a decrease in the minimum lending rate, there would be an increase in the demand for money. As a result, interest rate would increase.

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Answer 2

The correct option is A when the rate of interest increases and there is a decrease in the minimum lending rate.

What is needed to increase the interest rate?

It is a money-controlling technique to maintain the flow of money in the market. When there is excess money in the market, this measure can be used.

Thus, option A is correct the interest rate can be increased when there is excess money in the market, whereas the interest rate can be decreased when there is less money in the market in terms of providing loans at a reasonable rate.

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