Explain how a fall in interest rates can affect total spending in the economy.

A fall in interest rate will affect consumption, investment and exports-imports.Firstly as interest rates fall, it becomes cheaper to borrow money and it becomes less profittable to save money, therefore there are a lot of withdrawals (i.e. people borrow more), increase consumption by consumers and investment by firms.A fall in interest rates will also cause a fall in the exchange rate, meaning that the domestic currency depreciates against the foreign, it becomes cheaper. Since domestic goods are more affordable relative to foreign goods , exports increase and imports decrease.