Which of the following is not an appropriate policy for a central bank to follow if the economy is plagued with deflation?

Question

Quizplus · Accepted Answer

Increasing the target interest rate on overnight loans would tighten monetary policy further, which may worsen the deflationary pressure. The other options, such as using expansionary monetary policy to drive down interest rates, pursuing policy to promote the credibility of the central bank, and explicitly and credibly targeting inflation, are more appropriate in fighting deflation.

Which of the Following Is Not an Appropriate Policy for a Central