If the interest rate is decreased in an economy, it will

1. When the interest rate is decreased in an economy, the cost of borrowing money becomes cheaper for businesses and individuals. 2. Option (A) is incorrect. Lower interest rates generally encourage borrowing for consumption (e.g., loans for cars, homes, appliances) and reduce the incentive to save, thus tending to *increase* rather than decrease consumption expenditure. 3. Option (B) is incorrect. Lower interest rates aim to stimulate economic activity. While increased activity might eventually lead to higher incomes and potentially higher tax collection, a direct and immediate effect is not guaranteed, and the primary mechanism isn't through increased tax collection. 4. Option (C) is correct. A lower interest rate makes it cheaper for firms to borrow funds for investment projects (buying machinery, building factories, etc.). Thus, a decrease in the interest rate is expected to increase the investment expenditure in the economy, as more projects become financially viable. 5. Option (D) is incorrect. Lower interest rates reduce the return on savings, making saving less attractive compared to spending or investing. This tends to *decrease* rather than increase total savings in the economy.