ECONOMICS
GDP
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
Country Z’s central bank purchases government bonds
|
|
|
Country Z reduces government expenditures
|
|
|
Country Z is viewed as having increased political and economic risk
|
|
|
Country Z introduces a tax on consumption goods
|
Detailed explanation-1: -Because higher interest rates mean higher borrowing costs, people will eventually start spending less. The demand for goods and services will then drop, which will cause inflation to fall.
Detailed explanation-2: -A large and sudden jump in real interest rates could lead to a further selloff in stocks. Supply disruptions coupled with strong demand for goods, rising wages and higher commodities prices continue to challenge economies worldwide, pushing inflation above central bank targets.
Detailed explanation-3: -The higher the inflation rate, the more interest rates are likely to rise. This occurs because lenders will demand higher interest rates as compensation for the decrease in purchasing power of the money they are paid in the future.
Detailed explanation-4: -Interest rates are typically determined by the supply of and demand for money in the economy. If at any given interest rate, the demand for funds is higher than supply of funds, interest rates tend to rise and vice versa.