Answer to Question #97919 in Macroeconomics for sude

Question

In 1990’s in Turkey, economy entered into depression. As a result unemployment rate throughout
the country has risen. Most people have lost all their savings, and their income was so low, that they were only barely able to survive. How would you expect these developments to affect the interest rate (or discount rate) in general in Turkey?

Answer 1

The interest rate should be decreased in order to stimulate businesses to loan money and restore production.