PRC-3 · Chapter 19 · Question 15 of 17
A central bank operates under an 'inflation targeting' mandate. If current inflation appears to be soaring way above the target level, what action should the central bank take?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) The bank will raise benchmark interest rates
Explanation
To combat high inflation, the central bank implements contractionary policy by raising interest rates to make borrowing expensive and slow down aggregate demand.
More Monetary Policy MCQs
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