In which of the following cases can business managers expect an increase in interest rates?
A) When actual inﬂation is substantially lower than target inﬂation.
B) When actual inﬂation is substantially higher than target inﬂation.
C) When actual GDP is lower than potential GDP.
D) When actual GDP is equal to potential GDP.

Question

Quizplus · Accepted Answer

Central banks often raise interest rates to cool down the economy and combat inflation when actual inflation is substantially higher than the target inflation. This is because higher interest rates can reduce spending and investment, slowing down inflation.

In Which of the Following Cases Can Business Managers Expect