An increase in interest rates might be an example of a ________ policy for the purpose of ________.
A)monetary;reducing inflation
B)monetary;lowering unemployment
C)monetary;increasing the quantity of money
D)fiscal;reducing inflation
E)fiscal;lowering unemployment

Question

Quizplus · Accepted Answer

An increase in interest rates is a tool of monetary policy used to reduce inflation. When interest rates rise, borrowing becomes more expensive, which reduces consumer and business spending. This, in turn, reduces demand for goods and services, which can help to curb inflation. Higher interest rates also make saving more attractive, which can reduce spending and further facilitate a decrease in inflation. Therefore, option A is the correct choice.

An Increase in Interest Rates Might Be an Example of a ________