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The GDP of a country hasn’t improved in the past three years. The central bank decided to take a measure that will increase the amount of money people spend on goods and services. Which step should the central bank take?

increase interest rates
reduce interest rates
increase taxes
increase the required reserve ratio
increase the price of goods and services

User Workhorse
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2 Answers

5 votes
increase interest rates
5 votes

The correct answer is B) reduce interest rates.

The GDP of a country hasn’t improved in the past three years. The central bank decided to take a measure that will increase the amount of money people spend on goods and services. The step should the central bank has to take is "reduce interest rates."

When the central bank of this country realizes that the GDP hasn’t improved in the past three years, it has to reduce interests in order to allow banks to lend money with less interest so people could borrow that money to invest in new projects and open businesses, helping with the creation of jobs. If interest rates are low, citizens are going to better use their money in investing or spending.

User Australia
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