Which of the following monetary policies could reduce the amplitude of oscillations of output around its natural level?
A)raising interest rates before actual output attains its natural level
B)lowering interest rates when an economy is still overheated
C)lowering interest rates when output is above its natural level
D)all of the above.

Question

Quizplus · Accepted Answer

All the options describe actions that central banks might take to moderate the business cycle and stabilize the economy, aiming to reduce the amplitude of oscillations of output around its natural level. Raising interest rates before the output exceeds its natural level can cool down an overheating economy, while lowering interest rates when the economy is overheated or when output is above its natural level can stimulate economic activity, thus helping to smooth out fluctuations.

Which of the Following Monetary Policies Could Reduce the Amplitude