Answer to Question #197966 in Macroeconomics for Zohaib

Question

Suppose the market rate of interest on car loans declines substantially. Use

supply and demand analysis to predict the impact of the interest rate decline on the prices

of cars and the quantity sold.

Answer 1

More customers are more likely to borrow more money to buy more cars when interest rates decline. When customers pay less interest, there is a likelihood to spend a lot of money, which can lead to a rise in overall expenditure across the economy