Which of the following is a potential risk of maintaining low interest rates?

Maintaining low interest rates can lead to higher inflation for several reasons. When interest rates are low, borrowing becomes cheaper for consumers and businesses. This typically encourages more spending and investment as the cost of financing purchases is reduced. Increased demand for goods and services can drive prices up, especially if the supply does not meet this demand. Over time, as spending increases, businesses may raise their prices to keep up with this higher demand, contributing to inflation.

In contrast, while low interest rates might lead to increased savings in some contexts, they can also discourage saving, as individuals receive lower returns on their deposits. Additionally, consumer spending would usually increase with lower rates, not decrease. Investments are often stimulated by low rates as businesses seek to expand without the burden of high borrowing costs. Overall, higher inflation is a significant concern when interest rates remain low for extended periods, because it can erode purchasing power and potentially lead to economic instability.