Question

If a country's economy is operating below the full employment level of output at a very low inflation rate, the central bank of the country is most likely to lower administered interest rates to generate

a. More unemployment

b. Higher inflation

c. Economic growth

d. Fiscal surplus

Answer 1

If a country's economy is operating below the full employment level of output at a very low inflation rate, the central bank is likely to lower interest rates to generate economic growth.

Step-by-step explanation:

When a country's economy is operating below the full employment level of output at a very low inflation rate, the central bank of the country is most likely to lower administered interest rates to generate economic growth. Lowering the interest rates makes borrowing cheaper, which encourages businesses and individuals to invest and spend more. This increases aggregate demand, stimulates economic activity, and helps move the economy towards full employment.