In which of the following situations would the central bank in a certain country be most likely to lower interest rates?
A)The economy is growing slowly or not at all.
B)Inflation is rising rapidly.
C)The level of investment is very low.
D)The rate of savings is extremely high.
E)When the government needs to borrow money more cheaply.

Question

Quizplus · Accepted Answer

When the economy is growing slowly or not at all, it may indicate that there is not enough demand for credit. Lowering interest rates can encourage borrowing and boost economic growth.

Note: B, C, D, and E are situations where the central bank is less likely to lower interest rates. Rising inflation may lead to higher interest rates to control inflation. Low investment and high savings indicate that there is not enough demand for credit, so lowering interest rates may not have a significant impact. When the government needs to borrow money more cheaply, the central bank may not want to lower interest rates as it could create inflationary pressures.

In Which of the Following Situations Would the Central Bank