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S E35: Connecting Interest Rates & Output
Think Like An Economist
How Real Interest Rates Affect Aggregate Expenditure
Real interest rate is key to whether people consume or spend. The lower the real interest rate, the more likely you are to buy a car. A fall in the real interest rates tends to lead to more spending by governments. This means there's more money left over to spend on other things such as building roads and schools.
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