An activist central bank concerned with _________ would
A) real GDP; lower real interest rates if real GDP was above its potential level.
B) real GDP; raise real interest rates if real GDP was below its target level.
C) unemployment; lower real interest rates if unemployment was below the natural rate.
D) inflation; raise real interest rates if unemployment was below the natural rate.

Question

Quizplus · Accepted Answer

Raising real interest rates can help control inflation by cooling down the economy. When unemployment is below the natural rate, it indicates an overheated economy, which can lead to inflation. By raising interest rates, a central bank can slow down economic activity, helping to control inflation.

An Activist Central Bank Concerned with _________ Would