Why would lowering interest rates cause inflation but boost the economy?

Question

Is it more beneficial to lower interest rates in order to help the economy but suffer from inflation, or vice-versa?

Answer 1

It would mean banks would be more willing to loan each other money, making them more willing to temporarily dip below the withhold rate, making them more willing to issue loans.

People will then be encouraged to pursue those loans, with which they will buy expensive items or open new businesses.

These purchases and new jobs will stimulate the economy, but the larger amount of money circulating (because of the loans) will cause inflation.

Answer 2

This is done for the purpose of increasing economic growth. If interest rates are lowered, consumers and firms can obtain money more easily and this can bring about economic growth.

However, a downside to this is the increased aggregate demand for goods and services, causing inflation.

Whilst the opposite (increasing interest rates) would not cause inflation, this could potentially prove disastrous because there is no use in prices not increasing if money cannot be easily obtained anyway. Many businesses could go bankrupt and economic activity will slow down even more.