What is a typical consequence of lowering interest rates by a central bank?

Lowering interest rates by a central bank typically results in increased economic activity. When interest rates are reduced, borrowing costs also decrease, making loans more accessible and affordable for consumers and businesses. This encourages individuals to take out loans for big-ticket items, such as homes and cars, and stimulates businesses to invest in expansion, inventory, and capital improvements due to lower financing costs.

As demand for goods and services rises owing to increased consumer and business spending, the overall economic activity in the region is likely to grow. This further drives demand, which can lead to job creation and increased income levels, thus creating a positive feedback loop in economic growth.

In contrast to this, higher levels of interest rates often lead to reduced spending and investment, as they create a disincentive for borrowing. Therefore, the correct answer illustrates a common and intended consequence of a central bank's decision to lower interest rates to stimulate economic growth.