Which of the following explains what would happen if a financial institution lowered interest rates?

A) business would borrow the same amount

B) business would borrow less

C) business would borrow from foreign banks

D) business would borrow more

The correct option is

D) business would borrow more

Explanation:

Interest is the the amount of money individuals, business and even financial institutes (like commercial banks) pay to a lender, for borrowing money from the lender. Interest rate is the amount of interest added on the initial capital with time, at the end of the lending period; usually calculated in years or months. When interest rates are lowered by a financial institute, businesses are encouraged to borrow more from these financial institutes for business and production purposes because, the same interest budget can now be paid, for a larger amount of loan. Simply put, the lower the interest rate, the lesser the interest that is paid on the loan, and the more businesses borrow from financial institutes.