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Everything Else Equal, If the Growth Rate of a Country

Question 28

Multiple Choice

Everything else equal, if the growth rate of a country exceeds its sustainable rate, the central bank:


A) will keep interest rates low to keep the momentum.
B) will now identify this new rate as the sustainable rate and try to maintain it.
C) is likely to raise interest rates to slow the rate of growth.
D) is likely to lower the interest rate thinking a slowdown is coming to offset this boom.

Correct Answer:

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