To defend an inflation target when inflation is ____, the central bank ensures that real interest rates are
____, which reduces aggregate demand, putting downward pressure on inflation.

Question

Quizplus · Accepted Answer

When inflation is rising, the central bank increases real interest rates to reduce aggregate demand, thereby putting downward pressure on inflation. This helps to stabilize prices and bring inflation back towards the target level.

To Defend an Inflation Target When Inflation Is ____, the Central