Question

Nick wants to buy a new car, and is planning to borrow the money for his purchase from a bank. He read in the newspapers that the Federal Reserve is likely to implement policies in the next few weeks that are designed to stimulate the economy. Nick would probably get a lower interest rate on his car loan if he waits until after the Fed implements its new policies.
True or False?

Answer 1

Answer:

True

Explanation:

Economic stimulus refers to change in monetary or fiscal policies by the Federal Reserve with growth as an objective. One of the ways of implementing economic stimulus is lowering of interest rates by the Fed.

Lowering of interest rates by the Fed would have an effect on loans availed by the public. The quantity of loanable funds shall increase which would lead to lowering of interest rates charged by the banks.

In the given case, Nick stands to gain in the sense he can avail car loan at a lower rate of interest than currently offered, if he waits for Fed to implement it's new policies.

Thus, the given statement is true.