When interest rates are low, what typically happens to consumer spending?

When interest rates are low, borrowing costs are reduced, making it cheaper for consumers to take loans for major purchases such as homes, cars, or appliances. This typically leads to an increase in consumer spending since lower interest rates encourage both households and businesses to finance their expenditures.

Moreover, low-interest rates tend to boost disposable income because consumers pay less in interest on existing debts. With more available income and cheaper financing options, households are more likely to increase their purchases, thus stimulating economic growth.

In essence, the relationship between low-interest rates and consumer spending is a fundamental aspect of aggregate demand, as increased spending by consumers contributes significantly to overall economic activity.